Empresa Distribuidora y Comercial Norte 20F 2019 Annual report

aAs filed with the Securities and Exchange Commission on April 27, 2020

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019 Commission File Number: 001-33422

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

Distribution and Marketing Company of the North S.A.	Argentine Republic
(Translation of Registrant’s name into English)	(Jurisdiction of incorporation or organization)

Avenida Del Libertador 6363

Ciudad de Buenos Aires, C1428ARG

Buenos Aires, Argentina
(Address of principal executive offices)

Leandro Montero

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

Chief Financial Officer

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol	Name of each exchange on which registered
	EDN EDN	New York Stock Exchange, Inc.* New York Stock Exchange, Inc.
Class B Common Shares
American Depositary Shares, or ADSs, evidenced by American Depositary Receipts, each representing 20 Class B Common Shares

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

___

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: N/A

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 462,292,111 Class A Common Shares, 442,210,385 Class B Common Shares and 1,952,604 Class C Common Shares

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

Yes¨ Nox

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934. Yes¨ Nox

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yesx No¨

Indicate by check mark whether the registrant has submitted electronically, every

Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	¨	Accelerated Filer	x
Non-Accelerated Filer	¨	Emerging Growth Company	¨

If an emerging growth company that prepares its financial statements in accordance with U.S.GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (§ 15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP¨
International Financial Reporting Standards as issued by the International Accounting Standards Boardx Other¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17¨ Item 18¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes¨ Nox


	PART I
Item 1.	Identity of Directors, Senior Management and Advisors	2
Item 2.	Offer Statistics and Expected Timetable	2
Item 3.	Key Information	2
Item 4.	Information on the Company	40
Item 4A.	Unresolved Staff Comments	82
Item 5.	Operating and Financial Review and Prospects	82
Item 6.	Directors, Senior Management and Employees	124
Item 7.	Major Shareholders and Related Party Transactions	134
Item 8.	Financial Information	139
Item 9.	The Offer and Listing	145
Item 10.	Additional Information	151
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	176
Item 12.	Description of Securities Other than Equity Securities	178

	PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	179
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	179
Item 15.	Controls and Procedures	179
Item 16A.	Audit Committee Financial Expert	180
Item 16B.	Code of Ethics	180
Item 16C.	Principal Accountant Fees and Services	181
Item 16D.	Exemptions from the Listing Standards for Audit Committees	181
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	182
Item 16F.	Change in Registrant’s Certifying Accountant	182
Item 16G.	Corporate Governance	183
Item 16H.	Mine Safety Disclosures	188

	PART III
Item 17.	Financial Statements	189
Item 18.	Financial Statements	189
Item 19.	Exhibits	189

Index to Financial Statements		F-1

PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

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

FORWARD‑LOOKING STATEMENTS

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

·	the treatment of tariff update according to Integral Tariff Revision (“RTI”);
·	uncertainties related to future Government interventions or legal actions;
·	general political, economic, social, demographic and business conditions in the Republic of Argentina, or “Argentina” and particularly in the geographic market we serve;
·	the evolution of energy losses and the impact of fines and penalties and uncollectable debt;
·	the impact of regulatory reform and changes in the regulatory environment in which we operate;
·	electricity shortages;
·	potential disruption or interruption of our service;
·	the revocation or amendment of our concession by the granting authority;
·	our ability to implement our capital expenditure plan, including our ability to arrange financing when required and on reasonable terms;
·	fluctuations in exchange rates, including a depreciation of the Peso;
·	the effects of a pandemic or epidemic and any subsequent mandatory regulatory restrictions or containment measures;
·	the impact of high rates of inflation on our costs;
·	renegotiation of public debt; and,
·	additional matters identified in “Risk factors”.

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

SELECTED FINANCIAL DATA

The following table presents our selected financial data for each of the years in the four-year period ended December 31, 2019. The selected statement of comprehensive income (loss) and statement of cash flow data for the years ended December 31, 2019, 2018 and 2017 and the selected statement of financial position as of December 31, 2019 and 2018, have been prepared in accordance with IFRS as issued by the IASB and have been derived from our Financial Statements included elsewhere in this annual report. In addition, the selected statement of comprehensive income (loss) and statement of cash flow data for the year ended December 31, 2016 and the selected statement of financial position as of December 31, 2017 and 2016, have been derived from our historical financial statements (not included herein), restated in constant currency as of December 31, 2019. The summary financial data as of and for the year ended December 31, 2015 has not been presented as it cannot be provided on a restated basis without unreasonable effort or expense.

Our Financial Statements have been restated to reflect the changes in the general purchasing power of the Company’s functional currency (the Argentine peso), in conformity with the provisions of both IAS 29 “Financial reporting in hyperinflationary economies” and General Resolution No. 777-18 of the Argentine Securities Commission (Comisión Nacional de Valores or “CNV”). As a result, thereof, the Financial Statements are stated in terms of the measuring unit current at the end of the reporting period.

According to IAS 29, the restatement of financial statements is necessary when the functional currency of an entity is that of a hyperinflationary economy. To define a state of hyperinflation, IAS 29 provides a series of guidelines, including but not limited to (i) analyzing the behavior of population, prices, interest rates and wages faced with the development of price indexes and the loss of the currency’s purchasing power, and (ii) as a quantitative feature, which in practice, is the most weighted condition, verifying whether the cumulative inflation rate over three years approaches or exceeds 100%.

The cumulative inflation rate over the last three years in Argentina exceeded 100%. Moreover, due to certain macroeconomic factors, the projected inflation for the three-year period ending in 2020 surpasses 100% and the Argentine Government’s targets and other available projections indicate that this trend will not be reversed in the short-term.

According to IAS 29, the Argentine economy should be regarded as hyperinflationary as from July 1, 2018. Pursuant to IAS 29, the adjustment will be resumed from the date on which it was last made which is February 2003. Additionally, on December 4, 2018 Law No. 27,468 was enacted and repealed the provisions of Executive Order No. 664/03, which did not allow for the filing of inflation-adjusted financial statements. This law states that the provisions of Section 62 of Law No. 19,550 the (“Argentine Corporations Law”) regarding the preparation of financial statements to reflect the effects of inflation will continue to apply, consequently reinstating adjustment for inflation.

Taking into consideration the above-mentioned index, in the fiscal years ended December 2019, 2018, 2017 and 2016, the inflation rate amounted to 53.77%, 47.7%, 24.8% and 40.9%, respectively.

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

In this annual report, except as otherwise specified, references to “U.S.$” and “Dollars” are to U.S. Dollars, and references to “Ps.”, “AR$” and “Pesos” are to Argentine Pesos. Solely for the convenience of the reader, we have converted certain amounts included in “Item 3. Key Information” and elsewhere in this annual report from Pesos into Dollars using, for the information provided as of December 31, 2019, the seller exchange rate reported by the Banco de la Nación Argentina (“Banco Nación”), as of December 31, 2019. which was Ps.59.89 to U.S.$1.00 unless otherwise indicated. These conversions should not be considered representations that any such amounts have been, could have been or could be converted into U.S. Dollars at that or at any other exchange rate. On April 24, 2020, the exchange rate was Ps. 66.43, to U.S.$1.00.As a result of fluctuations in the Dollar Peso exchange rate, the exchange rate at such date may not be indicative of current or future exchange rates. See “—Risk Factors—Factors Relating to Argentina—Fluctuations in the value of the Peso could adversely affect the Argentine economy and, in turn, adversely affect our results of operations”. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos. For more information regarding historical exchange rates, see “Item 3.Key Information—Exchange Rates.”

Statement of comprehensive income (loss)

	2019	2019	2018	2017	2016
	US$	Ps.	Ps.	Ps.	Ps.
Revenue (1)	1,501.8	89,943.8	86,039.9	60,897.3	39,713.8
Electric power purchases	(952.4)	(57,041.8)	(49,015.2)	(32,015.3)	(18,436.5)
Subtotal	549.4	32,902.0	37,024.7	28,882.0	21,277.3
Transmission and distribution expenses	(269.6)	(16,146.6)	(16,780.5)	(14,219.2)	(20,395.8)
Gross margin	279.8	16,755.4	20,244.2	14,662.8	881.5

Selling expenses	(122.7)	(7,351.0)	(7,813.9)	(5,486.3)	(5,196.3)
Administrative expenses	(64.1)	(3,837.2)	(4,341.3)	(3,851.2)	(3,518.3)
Other operating expense, net	(32.9)	(1,970.4)	(2,031.0)	(1,695.6)	(1,403.9)
Gain from interest in joint ventures	-	1.4	2.5	15.5	-
Operating profit (loss) before income from provisional remedies higher costs recognition and SE Resolution 32/15	60.1	3,598.2	6,060.5	3,645.2	(9,237.0)
Recognition of income – provisional remedies – MEyM Note 2016-04484723	-	-	-	-	3,189.5
Income recognition on account of the RTI - SE Resolution No. 32/15	-	-	-	-	1,473.6
Higher costs recognition - SE Resolution No. 250/13 and subsequents Notes	-	-	-	-	285.1
Operating profit (loss)	60.1	3,598.2	6,060.5	3,645.2	(4,288.8)

Agreement on the Regularization of Obligations	285.4	17,094.8	-	-	-

Financial income	20.2	1,209.0	1,033.0	697.8	591.4
Finance costs	(112.9)	(6,762.4)	(7,652.7)	(3,952.3)	(3,981.5)
Other finance costs	(58.8)	(3,523.3)	(3,022.1)	(259.1)	(134.2)
Net finance costs	(151.5)	(9,076.7)	(9,641.8)	(3,513.6)	(3,524.3)

Monetary gain	186.9	11,191.8	13,076.4	8,465.2	8,409.9

Profit before taxes	380.9	22,808.1	9,495.1	8,596.8	596.8

Income tax	(178.2)	(10,673.8)	(2,886.9)	(784.3)	(226.5)

Profit for the year	202.7	12,134.3	6,608.2	7,812.5	370.3

Profit for the year attributable to:
Owners of the Company	202.7	12,134.3	6,608.2	7,812.5	370.3
Profit for the year	202.7	12,134.3	6,608.2	7,812.5	370.3

Other comprehensive income
*Items that will not be reclassified to profit or loss*
Results related to benefit plans	(0.1)	(7.3)	(8.7)	34.2	22.1
Tax effect of actuarial results on benefit plans	-	2.2	2.6	(11.1)	(7.8)
Total other comprehensive results	(0.1)	(5.1)	(6.1)	23.1	14.3



Comprehensive income for the year attributable to:
Owners of the parent	202.5	12,129.2	6,602.1	7,835.6	384.6
Comprehensive profit for the year	202.5	12,129.2	6,602.1	7,835.6	384.6

Basic and diluted earnings profit per share:
Earnings per share	0.2	13.8	7.4	8.7	0.4

Basic and diluted earnings profit per ADS (2):
Earnings per ADS from continuing operations	4.6	276.7	148.3	174.5	8.6

Columns Ps. in millions of pesos stated in terms of the measuring unit current as of December 31, 2019, except for amounts per share and number of shares or as otherwise indicated

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

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

Statement of financial position

	2019	2019	2018	2017	2016
	US$	Ps.	Ps.	Ps.	Ps.
ASSETS
Non-current assets
Property, plant and equipment	1,691.4	101,298.4	96,067.6	87,741.4	78,260.9
Interest in joint ventures	0.2	11.2	13.6	16.5	1.2
Right-of-use asset	4.4	260.9	-	-	-
Other receivables	0.4	26.0	1,231.3	96.4	143.1
Financial assets at fair value through profit or loss	-	-	-	-	125.9
Total non-current assets	1,696.4	101,596.5	97,312.5	87,854.3	78,531.1

Current assets
Inventories	32.2	1,926.9	1,937.2	998.9	1,232.8
Other receivables	4.8	289.7	369.7	450.4	508.1
Trade receivables	208.0	12,460.1	11,667.9	12,894.0	11,053.7
Financial assets at fair value through profit or loss	46.6	2,789.8	5,199.8	6,578.3	5,649.8
Financial assets at amortized cost	-	-	1,858.7	26.0	4.3
Cash and cash equivalents	6.8	409.6	42.5	188.1	732.6
Total current assets	298.4	17,876.1	21,075.8	21,135.7	19,181.3
TOTAL ASSETS	1,994.8	119,472.6	118,388.3	108,990.0	97,712.4

EQUITY
Share capital and reserve attributable to the owners of the Company
Share capital	14.6	875.1	883.3	898.7	897.0
Adjustment to share capital	442.6	26,509.4	26,716.7	26,969.2	�� 26,962.4
Treasury stock	0.5	31.4	23.1	7.9	14.5
Adjustment to treasury stock	9.5	566.5	359.3	106.8	108.5
Additional paid-in capital	6.2	370.0	370.0	353.6	282.3
Cost treasury stock	(37.4)	(2,242.6)	(1,643.5)	-	-
Legal reserve	21.5	1,289.1	234.9	234.9	234.9
Voluntary reserve	331.2	19,833.4	564.4	564.4	564.4
Other reserve	-	-	-	-	50.5
Other comprehensive loss	(3.6)	(215.6)	(210.5)	(204.4)	(227.5)
Retained earnings	202.6	12,134.1	20,323.2	13,807.5	5,995.0
TOTAL EQUITY	987.7	59,150.8	47,620.9	42,738.6	34,882.0


LIABILITIES
Non-current liabilities
Trade payables	6.2	369.6	440.1	547.0	660.0
Other payables	67.1	4,019.6	11,723.6	13,700.9	14,460.3
Borrowings	136.9	8,197.4	11,059.9	9,517.3	7,847.7
Deferred revenue	4.5	270.1	423.5	441.9	566.7
Salaries and social security payable	4.0	240.6	250.2	271.7	267.2
Benefit plans	8.7	523.9	592.2	734.7	754.0
Deferred tax liability	334.9	20,055.0	12,375.9	11,210.1	11,591.5
Tax liabilities	-	-	-	-	1.9
Provisions	34.4	2,062.6	1,645.6	1,358.0	967.2
Total non-current liabilities	596.7	35,738.8	38,511.0	37,781.6	37,116.5

Current liabilities
Trade payables	212.1	12,700.8	22,464.2	20,878.0	17,943.1
Other payables (1)	59.9	3,596.7	2,955.6	840.8	381.9
Borrowings	27.7	1,659.2	1,656.8	161.7	152.1
Derivative financial instruments	3.4	205.2	1.6	0.4	-
Deferred revenue	0.1	5.3	8.2	7.6	2.2
Salaries and social security payable	40.2	2,407.1	2,677.0	2,765.1	2,924.7
Benefit plans	0.9	51.1	49.8	71.3	94.6
Income tax payable	32.9	1,969.5	949.4	1,059.5	439.9
Tax liabilities	29.6	1,774.3	1,205.6	2,391.9	3,526.3
Provisions	3.6	213.8	288.2	293.5	249.1
Total current liabilities	410.4	24,583.0	32,256.4	28,469.8	25,713.9
TOTAL LIABILITIES	1,007.1	60,321.8	70,767.4	66,251.4	62,830.4

TOTAL LIABILITIES AND EQUITY	1,994.8	119,472.6	118,388.3	108,990.0	97,712.4

Columns Ps. in millions of pesos stated in terms of the measuring unit current as of December 31, 2019, except for amounts per share and number of shares or as otherwise indicated

Statement of Cash flows

	2019	2019	2018	2017	2016
	US$	Ps.	Ps.	Ps.	Ps.
Cash flows from operating activities
Profit for the year	202.7	12,134.3	6,608.2	7,812.5	370.3
Adjustments to reconcile net (loss) profit to net cash flows from operating activities:
Depreciation of property, plant and equipment	77.1	4,624.8	3,938.8	3,303.1	3,301.7
Depreciation of right-of-use assets	2.7	164.1	-	-	-
Loss on disposals of property, plant and equipment	1.1	63.6	206.8	76.6	375.9
Net accrued interest	92.5	5,538.0	6,606.6	3,250.0	3,379.9
Exchange differences	69.6	4,168.2	4,814.2	867.3	1,402.1
Income tax	178.2	10,673.8	2,886.9	784.3	226.5
Allowance for the impairment of trade and other receivables, net of recovery	22.6	1,354.4	1,503.1	602.2	666.4
Adjustment to present value of receivables	1.3	76.7	0.5	0.7	(8.8)
Provision for contingencies	22.8	1,367.2	1,113.4	834.0	464.1
Changes in fair value of financial assets	(4.7)	(281.0)	(1,147.9)	(672.9)	(1,371.3)
Accrual of benefit plans	4.4	262.1	172.5	260.6	298.7
Net gain from the repurchase of Corporate Notes	(7.6)	(456.9)	(7.0)	-	(0.1)
Gain from interest in joint ventures	-	(1.4)	(2.5)	(15.5)	-
Income from non-reimbursable customer contributions	(0.1)	(6.6)	(8.6)	(6.7)	(2.3)
Termination of agreement on real estate asset	(2.0)	(120.6)	(770.1)	-	-
Other financial results	2.5	146.9	-	-	-
Other reserve constitution - Share bases compensation plan	-	-	16.5	17.6	50.5
Agreement on the Regularization of Obligations	(285.4)	(17,094.8)	-	-
Higher costs recognition - SEE Resolution 250/13 and subsequents Notes	-	-	-	-	(285.1)
Income recognition on account of the RTI - SEE Resolution 32/15	-	-	-	-	(1,473.6)
Recognition of income – provisional remedies – MINEM Note 2016-04484723	-	-	-	-	(3,189.5)
Contractual resolution of real estate asset	-	-	-	-	-
Monetary gain (RECPAM)	(186.9)	(11,191.8)	(13,076.4)	(8,465.2)	(8,409.9)
Changes in operating assets and liabilities:
Increase in trade receivables	(63.4)	(3,795.0)	(3,277.5)	(4,034.5)	(8,462.1)
Decrease in other receivables	14.4	860.6	1,285.0	43.2	3,026.2
Increase in inventories	(8.4)	(504.5)	(1,260.7)	(815.2)	(435.2)
Increase in deferred revenue	-	-	135.9	-	133.6
Increase in trade payables	63.0	3,775.2	2,762.5	7,515.0	7,463.9
Increase in salaries and social security payable	15.0	899.8	867.2	484.1	891.6
Decrease in benefit plans	(0.7)	(44.7)	(85.1)	(87.0)	(87.7)
Increase (Decrease) in tax liabilities	16.4	984.8	(792.9)	(563.8)	2,817.7
Increase in other payables	(12.0)	(717.0)	4,599.1	673.8	6,654.1
Decrease in provisions	(1.6)	(98.1)	(500.1)	(90.6)	(147.5)
Payment of Tax payable	(43.8)	(2,623.9)	(1,362.6)	(600.9)	-
Net cash flows provided by operating activities	169.7	10,158.2	15,225.8	11,172.7	7,650.1

Statement of Cash flows (continued)

	2019	2019	2018	2017	2016
	US$	Ps.	Ps.	Ps.	Ps.
Cash flows from investing activities
Payment of property, plant and equipment	(156.5)	(9,370.0)	(13,147.3)	(12,143.4)	(6,507.9)
Net collection (payment) of financial assets	27.2	1,630.7	(3,605.8)	(1,558.5)	41.7
Redemtion net of money market funds	42.2	2,527.7	3,555.5	535.5	167.9
Mutuum charges granted to third parties	2.4	144.3	-	-	-
Mutuum payments granted to third parties	(1.7)	(99.0)	(176.7)	-	-
Collection of receivables from sale of subsidiaries	0.2	10.3	136.1	82.5	36.9
Net cash flows used in investing activities	(86.2)	(5,156.0)	(13,238.2)	(13,083.9)	(6,261.4)


Cash flows from financing activities
Payment of borrowings	(26.6)	(1,593.0)	-	-	-
Payment of financial lease liability	(3.6)	(213.4)	-	-	-
Proceeds from borrowings	-	-	-	1,977.4	-
Repayment of principal on loans	-	-	-	-	-
Payment of interests from borrowings	(18.9)	(1,134.8)	(1,003.6)	(643.5)	(794.7)
Repurchase of corporate notes	(25.6)	(1,531.0)	(577.4)	-	(15.1)
Payment of redemption on corporate notes	-	-	-	-	(647.0)
Acquisition of own shares	(10.0)	(599.3)	(1,643.5)	-	-
Net cash flows (used in) generated by financing activities	(84.7)	(5,071.5)	(3,224.5)	1,333.9	(1,456.8)

Decrease in cash and cash equivalents	(1.2)	(69.3)	(1,236.9)	(577.3)	(68.1)

Cash and cash equivalents at the beginning of year	0.7	42.5	188.1	732.6	365.4
Exchange differences in cash and cash equivalents	7.3	438.6	240.0	(0.1)	(13.8)
Result from exposure to inflation	-	(2.2)	851.3	32.9	449.1
Decrease in cash and cash equivalents	(1.2)	(69.3)	(1,236.9)	(577.3)	(68.1)
Cash and cash equivalents at the end of the year	6.8	409.6	42.5	188.1	732.6


Supplemental cash flows information
Non-cash activities

Agreement on the Regularization of Obligations		17,094.8	-	-	-

Adquisition of advances to suppliers, property, plant and equipment through increased trade payables		(549.2)	(1,041.3)	(900.6)	-

Adquisition of advances to suppliers, right-of-use assets through increased trade payables		(425.1)	-	-	-

Derecognition of property, plant and equipment through other receivables		-	675.5	-	-

Columns Ps. in millions of pesos stated in terms of the measuring unit current as of December 31, 2019, except for amounts per share and number of shares or as otherwise indicated

	Year ended December 31,
	2019	2018	2017	2016
Operating data
Energy sales (in GWh):	19,447	21,172	21,584	22,253
Residential	8,372	8,948	9,143	9,709
Small commercial	1,692	1,810	1,850	1,819
Medium commercial	1,549	1,668	1,745	1,821
Industrial	3,503	3,646	3,687	3,677
Wheeling system⁽¹⁾	3,569	3,823	3,968	4,013
Public lighting	713	724	709	704
Shantytowns	48	553	483	511
Customers (in thousands)⁽²⁾	3,119	3,040	2,950	2,866
Energy losses (%)	19.9%	18.2%	17.1%	17.0%
MWh sold per employee	4,071	4,301	4,507	4,743
Customers per employee	653	618	616	611

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

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

EXCHANGE RATES

In 2019, the Argentine Peso experienced a rapid depreciation against major foreign currencies, particularly against the U.S. dollar. According to the exchange rate information published by the Banco de la Nación Argentina, the Argentine Peso depreciated by 58.9% against the U.S. dollar during the year ended December 31, 2019 (compared to 102.2%, 17.4% and 21.9% in the years ended December 31, 2018, 2017 and 2016, respectively).

The following table sets forth the high, low, average and period-end exchange rates for the periods indicated, expressed in Pesos per U.S. Dollar and not adjusted for inflation. When preparing our financial statements, we utilize the selling exchange rates for U.S. Dollars quoted by the Banco Nación to translate our U.S. Dollar denominated assets and liabilities into Pesos. There can be no assurance that the Peso will not depreciate or appreciate in the future. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos. For more inform regarding depreciation see “—Risk Factors—Factors Relating to Argentina—Fluctuations in the value of the Peso could adversely affect the Argentine economy and, which could, in turn adversely affect our results of operations.”

	Low		High		Average		Period End
	(Pesos per U.S. Dollar)
Year ended December 31,
2016	13.20		16.03		14.99	(1)	15.89
2017	15.19		19.20		16.73	(1)	18.65
2018	18.41		41.25		29.26	(1)	37.70
2019	36.90		60.40		47.82		59.89

Month
November-19	59.50	(2)	59.95	(2)	59.73		59.94
December-19	59.82	(2)	59.99	(2)	59.88		59.89
January-20	59.82	(2)	60.35	(2)	59.99		60.35
February-20	60.47	(2)	62.21	(2)	61.37		62.21
March-20	62.31	(2)	64.47	(2)	63.39		64.47
April-20 (3)	64.53	(2)	66.43	(2)	65.43		66.43
_____________________
Source: Banco Nación

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

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

(3) Represents the corresponding exchange rates from April 1 through April 24, 2020.

RISK FACTORS

Risks Related to Argentina

Overview

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

We cannot assure that the Argentine Government will not adopt other policies that could adversely affect the Argentine economy or our business, financial condition or results of operations. In addition, we cannot assure you that future economic, regulatory, social and political developments in Argentina will not impair our business, financial condition or results of operations, or cause the market value of our ADSs and Class B common shares to decline.

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

The effects of a global or regional financial crisis and related turmoil in the global financial system may have a negative impact on ourbusiness, ability to access credit and the international capital markets, financial condition and results of operations, which is likely to be more severe on an emerging market economy, such as Argentina. (See “Argentina’s ability to obtain financing from international markets could be limited, which may impair its ability to implement reforms and foster economic growth and, consequently, affect our business, results of our operations and prospects growth. The Argentine Government may not be able to renegotiate its debt with their private creditors and/or with the IMF, thus affecting its capacity to obtain financing and credit and to plan and implement public policies and reforms that impulse the economic growth” below). This was the case in 2008, when the global economic crisis led to a sudden economic decline in Argentina in 2009, accompanied by inflationary pressures, depreciation of the Peso and a drop in consumer and investor confidence.

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

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

The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high levels of inflation and currency depreciation. Sustainable economic growth in Argentina depends on a variety of factors including the international demand for Argentine exports, the stability and competitiveness of the Peso against foreign currencies, confidence among consumers and foreign and domestic investors and a stable rate of inflation, national employment levels and the circumstances of Argentina’s regional trade partners. The Argentine economy has been volatile since 2011. For example, Argentina’s economy grew in 2017, but contracted in 2018. The Argentine economy remains vulnerable, as reflected by the following economic conditions:

·	according to the revised calculation of 2004 Gross Domestic Product (“GDP”) published by theInstituto Nacional de Estadística y Censos (National Statistics and Census Institute or “INDEC”) on June 29, 2016, which forms the basis for the real GDP calculation for every year after 2004, and recent data published by the INDEC in 2020, for the year ended December 31, 2019, Argentina’s real GDP decreased by 1.7% compared to the same period in 2018. Argentina’s performance has depended on a significant extent to high commodity prices which, despite having favorable long-term trends, are volatile in the short-term and beyond the control of the Argentine Government and the private sector;
·	the International Monetary Fund (“IMF”) in its World Economic Outlook projected in October 2019 a 3.1% contraction in Argentina’s economy for 2019 due to the loss of trust and the hardening in the conditions required to access credit and a 6.0% contraction for 2020 due to the effects of COVID19. For more information see “Item 3. Key Information—Risk Factors—Developments relating to the novel coronavirus may have a material adverse impact on our business operations, financial condition or results of operations.” and “Item 4. Information on the Company—Recent Developments in Argentina – Measures Designed to Address the COVID-19 Outbreak.”
·	continued increases in public expenditures have resulted and could continue to result in fiscal deficit and affect economic growth;
·	inflation remains high and may continue at those levels in the future;
·	investment as a percentage of GDP remains low to sustain the growth rate of the past decades;
·	protests or strikes may adversely affect the stability of the political, social and economic environment and may negatively impact the global financial market’s confidence in the Argentine economy;
·	energy or natural gas supply may not be sufficient to supply increased industrial activity (thereby limiting industrial development) and consumption;
·	unemployment and informal employment remain high; and

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

As in the recent past, Argentina’s economy may be adversely affected if political and social pressures inhibit the implementation by the Argentine Government of policies designed to control inflation, generate growth and enhance consumer and investor confidence, or if policies implemented by the Argentine Government that are designed to achieve these goals are not successful. These events could materially affect our financial condition and results of operations, or cause the market value of our ADSs and our Class B common shares to decline.

In the last years, the Argentine Peso experienced a rapid depreciation against the U.S. dollar and other major foreign currencies. According to the exchange rate information published by the Banco de la Nación Argentina, the Argentine Peso depreciated by 58.9% against the U.S. dollar during the year ended December 31, 2019 (compared to 102.2%, 17.4% and 21.9% in the years ended December 31, 2018, 2017 and 2016, respectively).

Through 2019, the Peso’s depreciation continued, and in September 2019, as a result of the economic instability and the significant depreciation that followed the primary elections, as described below, the Argentine Government and the Central Bank of the Republic of Argentina (Banco Central de la República Argentina, the “Central Bank” or “BCRA”) adopted a series of measures reinstating foreign exchange controls, which apply with respect to access to the foreign exchange market by residents for savings and investment purposes abroad, the payment of external financial debts, the payment of dividends in foreign currency abroad, payments of goods and services in foreign currencies, payments of imports of goods and services, and the obligation to repatriate and settle for pesos the proceeds from exports of goods and services, among others. Other financial transactions such as derivatives and securities related operations, were also covered by the new foreign exchange regime. Following the change in government, the new administration extended the validity of such measures, which were originally in effect until December 31, 2019, and established further restrictions by means of the recentlyenacted Law No. 27,541 on Social Solidarity and Productive Reactivation in the Framework of the Public Emergency (Ley de Solidaridad Social y Reactivación Productiva en el Marco de la Emergencia Pública, or the “Productive Reactivation Law”), regulated by Executive Orders Nos. 58 and 99/19, including a new tax on certain transactions involving the purchase of foreign currency by both Argentine individuals and entities. Although the official exchange rate has stabilized since the adoption of the foreign exchange controls, we cannot assure you that the official exchange rate will not fluctuate significantly in the future. There can be no assurances regarding future modifications to exchange controls. Exchange controls could adversely affect our financial condition or results of operations and our ability to meet our foreign currency obligations and execute our financing plans.

The success of these measures is subject to uncertainty and any further depreciation of the Argentine Peso or our inability to acquire foreign currency could have a material adverse effect on our financial condition and results of operations. We cannot predict the effectiveness of these measures. We cannot predict whether, and to what extent, the value of the Argentine Peso may depreciate or appreciate against the U.S. dollar or other foreign currencies, and how these uncertainties will affect electricity consumption. Furthermore, no assurance can be given that, in the future, no additional currency or foreign exchange restrictions or controls will be imposed. Existing and future measures may negatively affect Argentina’s international competitiveness, discouraging foreign investments and lending by foreign investors or increasing foreign capital outflow which could have an adverse effect on economic activity in Argentina, and which in turn could adversely affect our business and results of operations. We cannot predict how these conditions will affect the consumption of services provided by Edenor or our ability to meet our liabilities denominated in currencies other than the Argentine Peso. Any restrictions on transferring funds abroad imposed by the government could undermine our ability to pay dividends on our ADSs or make payments (of principal or interest) under our outstanding indebtedness in U.S. dollars, as well as to comply with any other obligation denominated in foreign currency.

We cannot assure that a decline in economic growth, an increase in economic instability or the expansion of economic policies and measures taken or that may be adopted in the future by the Argentine Government to control inflation or address other macroeconomic developments that affect private sector entities such as us, all developments over which we have no control, would not have an adverse effect on our business, financial condition or results of operations or would not have a negative impact on the market value of our ADSs and Class B common shares.

Economic and political developments in Argentina, and future policies of the Argentine Government may affect the economy as well as the operations of the energy distribution industry, including Edenor

The Argentine Government has historically exercised significant influence over the economy, and our Company has operated in a highly regulated environment. The Argentine Government may promulgate numerous, far-reaching regulations affecting the economy and electricity companies in particular.

Between December 2015 and December 2019, the Macri administration implemented several significant economic policy reforms towards the de-regulation of the economy and reordering the main economic variables. Those policies included, among others: (i) declaration of a state of emergency for the electricity system and reforms thereto; (ii) reforms affecting the transport and distribution of natural gas; (iii) reforms concerning the INDEC; (iv) reforms affecting foreign exchange and foreign trade; (v) modification of Argentina’s debt policy; (vi) the correction of monetary imbalances; (vii) reform of the pension framework; (viii) a tax reform (the “Tax Reform”); and (ix) the implementation of a fiscal consensus (Pacto Fiscal). Nevertheless, the high inflation rates and the Peso’s depreciation forced the Argentine Government to reinstate the foreign exchange controls.

On August 11, 2019, mandatory primary elections were held in Argentina. As a consequence of the results of primary elections in Argentina, which indicated that President Macri would not be reelected and could be replaced by the opposition candidate Alberto Fernández, the political and economic environment became subject to uncertainty. Between August 12 and August 30, 2019, the Peso lost approximately 32% of its value with respect to the U.S. dollar and BCRA’s international reserves decreased by approximately US$11.6 billion. During the same period, theBolsas y Mercados Argentinos S.A. (“BYMA”) index lost approximately 10.6% of its value.

In response to the rapid decline in the value of the Argentine Peso and continued market uncertainty following the results of the primary elections, the BCRA announced several monetary and exchange risk management measures to contain the volatility of the exchange market. See “— The Argentine economy remains vulnerable and any significant decline may adversely affect our business, results of operations, and financial condition.”

In October 2019 Alberto Fernández was elected president of Argentina with 48.24% of the votes and took office on December 10, 2019, and since then has implemented–and is expected to continue implementing- several policies and reforms, mainly with respect to the economy.

The Macri and the current administration, implemented several policies pursuing a reduction in inflation and a stabilization in the foreign currency market. Those policies included:

• Reprofiling the national debt: On December 20, 2019, the Argentine Government issued Decree No. 49/19, which deferred some debt amortization payment obligations emerging from certain Treasury Bonds (Letras del Tesoro) denominated in Dollars until August 31, 2020. Additionally, on February 5, 2020, the Argentine Congress passed Law No. 27,544 (the “Law for the Restauration of the Sustainability of the National Debt issued under Foreign Law”) which authorized the Executive Branch to carry out transactions regarding the administration of liabilities and/or swaps/ and/or restructurations of the services of interests and principal amortizations of national bonds issued under foreign law. Additionally, the Executive Branch issued Decree No. 141/20 which deferred the payment of the amortization of national bonds in dual currency with maturity in 2020 entirely until September 30, 2020 and stablished the interruption of the accrual of interests.

• Reinstating foreign exchange controls: On September 1, 2019, certain foreign exchange restrictions were reinstated towards diminishing the volatility of the Argentine Peso with respect to the dollar. These restrictions, which were – and continue to be – further amended and complemented, regulate, among others, the purchase of external assets for Argentine citizens, the payment of financial debts outside the Argentine borders, the payment of dividends, the payment of imports of goods and services, the obligation to repatriate and settle the incomes from exports of goods and services. See “Item 10. Additional Information—Exchange Controls.”

• Declarationof the state of public emergency: The Productive Reactivation Law declared the state of public emergency in addressing diverse economic, financial, fiscal, administrative, pensions, tariff, energy, health and social matters. The Productive Reactivation Law delegated certain legislative powers to the Executive Power in order to tackle social and economic distress, as well as to adjust Argentina’s public debt profile and authorized the Executive Power to perform all necessary acts to recover and ensure the sustainability of the Argentine public deb. Additionally, the Productive Reactivation Law empowered the Executive Branch to intervene the Ente Nacional Regulador de la Electricidad (“ENRE”) and the Ente Nacional Regulador del Gas (“ENARGAS”) for one year. By means of Decree No. 277/20, the Executive Power ordered the intervention of the ENRE until December 31, 2020.

• Tax reforms: Several tax reforms were introduced. See “Item 10. Additional Information— Taxation.”

• Tariff revisions: The Productive Reactivation Law freezed the prices of natural gas and electricity for 180 days since its effectiveness, and invited the Argentine provinces to adhere to this policy. Additionally, the Productive Reactivation Law authorized the Executive Branch to renegotiate tariffs under federal jurisdiction within the RTI or based on an extraordinary revision in accordance with Law No. 24,076.

• Tariffs on exports: The Productive Reactivation Law authorizes the Executive Branch to establish tariffs on exports that in no case can exceed the 33% of the taxable value or the official FOB price. The Productive Reactivation Law forbids that the percentage of tariffs on exports of hydrocarbons and mining exceeds 8% of the taxable value or the official FOB price, and establishes that in any case such export right shall diminish the wellhead value for the calculation and payment of royalties.

• Double severance for termination without cause: Decree of Necessity and Urgency N° 34/19 (“Decree 34/19”), issued on December 13, 2019, declared labor public emergency for the term of 180 days since its effectiveness. During this term, termination without cause of employment relationships entered into prior to the effectiveness of the Decree 34/19, entitled the terminated employee to receive a compensation equal to two times the severance due prior to the Decree 34/19. Additionally, the Productive Reactivation Law established new percentages and mechanisms to calculate the employers’ contributions.

• Suspension of Section 124 of Law N° 27,467: In 2019 the Argentine Congress enacted the 2019 Federal Budget of Expenditures and Resources. The first paragraph of Section 124 of Law No. 27,467 instructed the Executive Branch to promote the transfer of Edenor’s and Empresa Distribuidora de Energía Sur S.A.’s (“Edesur”) jurisdiction to the jurisdiction of the Province of Buenos Aires and the City of Buenos Aires as of January 1, 2019 and the creation of a new oversight body. The second paragraph of Section 124 of Law no. 27,467 provided that once the transfer of the jurisdiction was effective, the ENRE should retain its jurisdiction in connection with all aspects not related to the public service of electricity distribution. The Productive Reactivation Law suspended the applicability of the second paragraph of section 124 of Law N° 24,467 and the ENRE reassumed the jurisdiction over the public service of electricity distribution provided by Edenor and Edesur for the term of one year.

As of the date of this annual report, the long-term impact of these measures and any future measures taken by the current administration on the Argentine economy as a whole and the energy distribution sector in particular remains uncertain. It is not possible to predict the effect of such reforms with certainty and they could be disruptive to the economy and fail to benefit or adversely affect the Argentine economy and the energy distribution industry, and in turn, our business, results of operations and financial condition. We are also unable to predict the measures that the Argentine Government may adopt in the future, and how they will impact on the Argentine economy and our results of operations and financial condition.

In the event of any economic, social or political crisis, companies operating in Argentina may face the risk of strikes, expropriation, nationalization, mandatory amendment of existing contracts, and changes in taxation policies including tax increases and retroactive tax claims. In addition, Argentine courts have sanctioned modifications on rules related to labor matters, requiring companies to assume greater responsibility for the assumption of costs and risks associated with sub-contracted labor and the calculation of salaries, severance payments and social security contributions. Since we operate in a context in which the governing law and applicable regulations change frequently, also as a result of changes in government administrations, it is difficult to predict if and how our activities will be affected by such changes.

We cannot assure you that future economic, regulatory, social and political developments in Argentina will not adversely affect our business, financial condition or results of operations, or cause the decrease of the market value of our securities.

If the high levels of inflation continue, the Argentine economy and our results of operations could be adversely affected

Historically, inflation has materially undermined the Argentine economy and the Argentine government’s ability to create conditions that allow growth. In recent years, Argentina has confronted inflationary pressures, evidenced by significantly higher fuel, energy and food prices, among other factors.

According to data published by the INDEC, Consumers Price Index (“CPI”) rates for July, August, September, October, November and December 2019, and January, February and March 2020 were 2.2%, 4.0%, 5.9%, 3.3%, 4.3%, 3.7%, 2.3%, 2.0% and 3.3%, respectively. See“—The credibility of several Argentine economic indexes was called into question, which may lead to a lack of confidence in the Argentine economy and, in turn, limit our ability to access credit and the capital markets” below. The National CPI variation was of 53.8% in 2019 and 47.6% in 2018. The Argentine Government’s adjustments to electricity and gas tariffs, as well as the increase in the price of gasoline have affected prices, creating additional inflationary pressure. If the value of the Argentine Peso cannot be stabilized through fiscal and monetary policies, an increase in inflation rates could be expected.

A high inflation rate affects Argentina’s foreign competitiveness by diluting the effects of the Peso depreciation, negatively impacting employment and the level of economic activity and undermining confidence in Argentina’s banking system, which may further limit the availability of domestic and international credit to businesses. In turn, a portion of the Argentine debt continues to be adjusted by the Stabilization Coefficient(Coeficiente de Estabilización de Referencia, or “CER”), a currency index, that is strongly related to inflation. Therefore, any significant increase in inflation would cause an increase in the Argentine external debt and consequently in Argentina’s financial obligations, which could exacerbate the stress on the Argentine economy. The efforts undertaken by the previous administration to reduce inflation have not achieved the desired results. A continuing inflationary environment could undermine our results of operations, adversely affect our ability to finance the working capital needs of our businesses on favorable terms, and it could adversely affect our results of operations and cause the market value of our ADSs and our Class B common shares to decline.

There is uncertainty regarding the effectiveness of the policies implemented by the Argentine government to reduce and control inflation and the potential impact of those policies. An increase in inflation may adversely affect the Argentine economy, which in turn may have a negative impact in our financial condition and the result of our operations.

As of July 1, 2018, the Argentine Peso qualifies as a currency of a hyperinflationary economy and we are required to restate our historical financial statements in terms of the measuring unit current at the end of the reporting year, which could adversely affect our results of operation and financial condition

As of July 1, 2018, the Peso qualifies as a currency of a hyperinflationary economy and we are required to restate our historical financial statements by applying inflationary adjustments to our financial statements, which could adversely affect our results of operation and financial condition.

Pursuant to IAS 29 “Financial Reporting in Hyperinflationary Economies”, the financial statements of entities whose functional currency is that of a hyperinflationary economy must be restated for the effects of changes in a suitable general price index. IAS 29 does not prescribe when hyperinflation arises, but includes several characteristics of hyperinflation. The IASB does not identify specific hyperinflationary jurisdictions. However, in June 2018, the International Practices Task Force of the Centre for Quality (“IPTF”), which monitors “highly inflationary countries”, categorized Argentina as a country with projected three-year cumulative inflation rate greater than 100%. Additionally, some of the other qualitative factors of IAS 29 were present, providing prima facie evidence that the Argentine economy is hyperinflationary for the purposes of IAS 29. Therefore, Argentine companies using IFRS are required to apply IAS 29 to their financial statements for periods ending on and after July 1, 2018.

Adjustments to reflect inflation, including tax indexation, such as those required by IAS 29, were prohibited by Law No. 23,928. Additionally, Decree No. 664/03, issued by the Argentine Government (“Decree 664”), instructed regulatory authorities, such as the Public Registries of Commerce, the Superintendence of Corporations of the City of Buenos Aires and the Argentine Securities Commission (Comisión Nacional de Valores or “CNV”), to accept only financial statements that comply with the prohibitions set forth by Law No. 23,928. However, on December 4, 2018, Law No. 27,468 (“Law 27,468”) abrogated Decree 664 and amended Law No. 23,928 indicating that the prohibition of indexation no longer applies to the financial statements. Some regulatory authorities, such as the CNV and the IGJ, have required that financial statements for periods ended on and after December 31, 2018 that are to be submitted to them should be restated for inflation following the guidelines in IAS 29. However, for purposes of determination of the indexation for tax purposes, Law No. 27,468 substituted the Wholesale Price Index (“WPI”) for the CPI, and modified the standards for triggering the tax indexation procedure.

During the first three years as from January 1, 2018, the tax indexation will be applicable if the variation of the CPI exceeds 55% in 2018, 30% in 2019 and 15% in 2020. The tax indexation determined during any such year will be allocated as follows: 1/3 in that same year, and the remaining 2/3 in equal parts in the following two years. From January 1, 2021, the tax indexation procedure will be triggered under similar standards as those set forth by IAS 29.

We cannot predict the future impact that the eventual application of tax indexation and related inflation adjustments described above will have on our financial statements or their effects on our business, results of operations and financial condition.

The credibility of several Argentine economic indexes was called into question, which may lead to a lack of confidence in the Argentine economy and, in turn, limit our ability to access credit and the capital markets

Prior to 2015, the credibility of the CPI, as well as other indices published by the INDEC were called into question.

On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to CPI, GDP, inflation and foreign trade data, as well as with poverty and unemployment rates, the Macri administration declared a state of administrative emergency for the national statistical system and the INDEC. The INDEC temporarily suspended the publication of certain statistical data until a reorganization of its technical and administrative structure to recover its ability to produce reliable statistical information.

In 2017, the INDEC began publishing a national CPI (the “National CPI”), which is based on a survey conducted by the INDEC and several provincial statistical offices in 39 urban areas including each of Argentina’s provinces. The official CPI inflation rate for the year ended December 31, 2019 was53.8%.

Any future required correction or restatement of the INDEC indexes could result in decreased confidence in Argentina’s economy, which, in turn, could have an adverse effect on our ability to access international capital markets to finance our operations and growth, and which could, in turn, adversely affect our results of operations and financial condition and cause the market value of our ADSs and Class B common shares to decline.

Argentina’s ability to obtain financing from international markets could be limited, which may impair its ability to implement reforms and foster economic growth and, consequently, affect our business, results of our operations and prospects growth. The Argentine Government may not be able to renegotiate its debt with their private creditors and/or with the IMF, affecting its capacity to obtain financing and credit and to plan and implement public policies and reforms that foster economic growth

Argentina’s history of defaults on its external debt and the protracted litigation with holdout creditors may reoccur in the future and prevent Argentine companies such as us from accessing the international capital markets readily or may result in higher costs and more onerous terms for such financing, and may therefore negatively affect our business, results of operations, financial condition, the value of our securities, and our ability to meet our financial obligations.

Following the default on its external debt in 2001, Argentina sought to restructure its outstanding debt by offering holders of the defaulted bonds two opportunities to exchange them for newly issued debt securities, in 2005 and again in 2010. Holders of approximately 93% of Argentina’s defaulted debt participated in the exchanges. Nonetheless, a number of bondholders held out from the exchange offers and pursued legal actions against Argentina in the courts of the United States and several other jurisdictions.

The Macri Administration settled several agreements with the defaulted bondholders, ending with more than 15 years of litigation. On April 22, 2016, Argentina issued U.S.$16.5 billion of new bonds, U.S.$9.3 billion of which were applied to pay the amounts due to comply with the agreements settled with the defaulted bondholders. Since then, almost every pending claim has been settled.

In addition, certain bondholders that did not participate in the exchange offers described above, filed claims with the International Centre for Settlement of Investment Disputes (“ICSID”) alleging that the emergency measures adopted by the Argentine Government in 2002 did not meet the fair and equal treatment requirements of several bilateral investment treaties to which Argentina is a party. Several of these claims have been resolved against Argentina.

On May 8, 2018, the Macri administration announced that the Argentine Government would initiate negotiations with the IMF in views of entering into a stand-by credit facility that would give Argentina access to financing by the IMF. These negotiations were culminated with the execution of aUS$55.7 billion stand-by credit agreement (“SBA”)that was approved by the IMF Board on June 20, 2018 and a first revision under the mentioned stand-by arrangement that was approved by the IMF Board on October 26, 2018, which included the enlargement of the arrangement for U.S.$5.7 billion. As of the date of this annual report, Argentina has received disbursements under the SBA for US$44 billion. Notwithstanding the foregoing, the current administration has publicly announced that they will refrain from requesting additional disbursements under the agreement, and instead vowed to renegotiate its terms and conditions in good faith.

Following the execution of the SBA, in August 2018, Argentina faced an unexpected bout of volatility affecting emerging markets generally. In September 2018, the Macri administration discussed with the IMF staff further measures of support in the face of renewed financial volatility and a challenging economic environment. On October 26, 2018, in light of the adjustments to fiscal and monetary policies announced by the Argentine Government and the BCRA, the IMF’s Executive Board allowed the Argentine government to draw the equivalent of US$5.7 billion, approved an argumentation of the SBA increasing total assets to approximately US$57.1 billion for the duration of the program through 2021 and the front loading of the disbursements. Under the revised SBA, IMF resources for Argentina in 2018-19 increased by US$18.9 billion.

On August 28, 2019, the Macri administration issued a decree deferring the scheduled payment date for 85% of the amounts due on short-term notes maturing in the fourth quarter of 2019, governed by Argentine law and held by institutional investors. Of the deferred amounts, 30% would be repaid 90 days after the original payment date and the remaining 70% would be repaid 180 days after the original payment date, except for payments under Lecaps due 2020 held domestically, which would be repaid entirely 90 days after the original payment date. Amounts due on short-term notes held by individual investors would be paid as originally scheduled. In December 2019, the Fernández administration further extended payments of a series of short term U.S. dollar-denominated notes which were held by institutional investors until the end of August 2020.

Moreover, in December 2019, the Fernández administration further extended by decree payments of a series of short term Argentine-law governed treasury notes denominated in U.S. dollars held by institutional investors through August 2020. Additionally, on February 11, 2020, the Argentine Government decreed the extension of maturity to September 30, 2020 of a dollar-linked treasury note governed by Argentine law, which had been originally subscribed to a large extent with U.S. dollar remittances, to avoid a payment with Argentine pesos that would have required significant sterilization efforts by the monetary authority. Also, in February 2020, the Argentine Congress enacted a law enabling the government to take all necessary steps toward rendering the Argentine sovereign debt governed by foreign law sustainable. Additionally, an IMF team visited Buenos Aires in February 2020 to discuss the recent macroeconomic developments and learn more about the Argentine authorities’ economic plans and policies. On February 19, 2020 the IMF staff issued a statement concluding that in light of recent developments and the materialization of certain risks to debt sustainability that were considered during the previous Debt Sustainability Analysis (DSA) published in July 2019, the IMF staff assessed Argentina’s debt to be unsustainable. Accordingly, the IMF staff stated that “a definitive debt operation—yielding a meaningful contribution from private creditors—is required to help restore debt sustainability with high probability”.

On April 5, 2020, the Executive Branch issued Decree No. 346/2020 by which the Government deferred the payment of interest and principal amortization obligations of certain public debt issued under Argentine law and denominated in U.S. Dollars, until December 31, 2020, or an earlier date to be determined by the Ministry of Economy, considering the progress of the public debt’s sustainability restoring process (Proceso de Sostenibilidad de la Deuda Pública). This Decree did not affect the currency of denomination, principal or interest set forth under the original terms of the issuance. On April 21, 2020, the Argentine Government announced its offer to exchange external bonds in the aggregate of amount of approximately US$64 billion for new bonds. The Argentine Government did not make the interest payment due on April 22, 2020 with respect to three of its US$-denominated bonds and availed itself of the 30-day grace period provided under the indenture. As of the date of this annual report, there is no certainty on the acceptance the exchange offer will have among the bondholders or whether further negotiations and proposals will be carried out and the consequences of such negotiations. Any new event of default by the Argentine Government could negatively affect their valuation and repayment terms, as well as have a material adverse effect on the Argentine economy and, consequently, our business and results of operations.

Without renewed access to the financial market the Argentine Government may not have the financial resources to implement reforms and boost growth, which could have a significant adverse effect on the country’s economy and, consequently, on our activities. Likewise, Argentina’s inability to obtain credit in international markets could have a direct impact on the Company’s ability to access those markets to finance its operations and its growth, including the financing of capital investments, which would negatively affect our financial condition, results of operations and cash flows.

Past situations, such as the lawsuits with creditors that did not accept to the debt exchange, the claims before the ICSID, and the economic policy measures adopted by the Argentine Government or any future default of Argentina regarding its financial obligations, including as a consequence of the exchange offer not being accepted by holders, may harm Argentine companies’ ability to obtain financing. Further, the financial conditions of such access could be disadvantageous to Argentine companies and, therefore, may adversely affect our business, results of operations, financial condition, the value of our securities, and our ability to meet our financial obligations.

We cannot predict if the Argentine Government will be able to comply with the terms of the SBA or if it will be able to successfully renegotiate the debt held with private bondholders. There is uncertainty regarding the Argentine Government’s ability to successfully stabilize the foreign exchange market, re-establish the economic growth and comply with the SBA terms. Additional depreciation of the Peso against the U.S. dollar, a breach of the terms of the SBA or the potential failure of the Argentine Government in the renegotiation of the debt may adversely affect the Argentine economy and, in turn, our business, financial situation, the results of our operations and the value of our ADSs and our common shares.

Fluctuations in the value of the Argentine Peso could adversely affect the Argentine economy and could in turn adversely affect our results of operations

The Argentine Peso suffered important fluctuations during the last four years: it lost more than 22% of its value with respect to the U.S. dollar in 2016 and approximately 17% in 2017, 102.2% in 2018 and 59% in 2019. We are unable to predict the future value of the Peso against the U.S. Dollar. If the Peso devaluates further, the negative effects on the Argentine economy could have adverse consequences on our business, our results of operations and the market value of our ADSs, including as measured in U.S. Dollars.

On September 1, 2019, certain exchange controls and restrictions were reinstated in order to control the volatility in the currency exchange rate. The new controls and restrictions regulate, among others, the purchase of external assets for residents in Argentina, the payment of financial debts outside the Argentine borders, the payment of dividends, they payment of imports of goods and services, the obligation to repatriate and settle the incomes from exports of goods and services. Additional volatility, appreciation or depreciation of the Peso against the U.S. dollar or reduction of the Central Bank’s reserves because of currency intervention could adversely affect the Argentine economy and our ability to service our debt obligations and could affect the value of our ADSs and our Class B common shares. See “Item 10. Additional Information—Exchange Controls.”

On the other hand, a significant appreciation of the Peso against the U.S. Dollar also presents risks for the Argentine economy, including the possibility of a reduction in exports (as a consequence of the loss of external competitiveness). Any such increase could also have a negative effect on economic growth and employment, reduce the Argentine public sector’s revenues from tax collection in real terms, and have a material adverse effect on our business, our results of operations,our ability to repay our debt within its maturity dates and the market value of our ADSs, as a result of the overall effects of the weakening of the Argentine economy.

Fluctuations in the value of the Peso may also adversely affect the Argentine economy, our financial condition and results of operations. The Peso has been subject to significant depreciation against the U.S. dollar in the past and may be subject to further fluctuation in the future. A depreciation of the Peso against major foreign currencies may also have an adverse impact on our capital expenditure program and increase the Peso amount of our trade liabilities and financial debt denominated in foreign currencies.The depreciation of the Peso may have a negative impact on the ability of certain Argentine businesses to service their foreign currency-denominated debt, lead to high inflation, significantly reduce real wages, jeopardize the stability of businesses whose success depends on domestic market demand, including public utilities, and the financial industry and adversely affect the Argentine Government’s ability to honor its foreign debt obligations.

Intervention by the Argentine Government may adversely affect the Argentine economy and, as a result, our business and results of operations

In the recent past,Argentine Government directly intervened in the economy, including through the implementation of expropriation and nationalization measures, price controls and exchange controls.

Starting in December 2001, the Argentine Government imposed a number of monetary and foreign exchange controls measures in an attempt to prevent capital flight and a further depreciation of the Peso. These measures included restrictions on the free disposition of funds deposited with banks, the exchange of Argentine currency into foreign currencies and the transfer of funds abroad without prior approval by the Central Bank.

Additionally, between 2011 and 2015, the Fernández de Kirchner administration –through a combination of exchange controls and tax regulations- significantly reduced the access to the foreign currency market for individuals and entities in the private sector. Subsequently, a non-official Dollar currency market emerged, with a major difference between the official and the non-official exchange rate.

At the beginning of the Macri administration, the Argentine Government eliminated exchange restrictions implemented during the Fernández de Kirchner administration. Notwithstanding, on September 1, 2019, the Argentine Government reinstated several exchange restrictions regarding the inflows and outflows of foreign currency to the country, with the intention of diminishing the foreign exchange rates volatility. As of the date of this annual report, such exchange restrictions are in place.

Also, the Argentine Government has historically adopted measures to control –directly or indirectly- the individuals’ and private companies’ access to the foreign trade and foreign exchange markets, such as restriction to free access, and the obligation to repatriate and settle with the local exchange market every income in foreign currency obtained from exports. Those regulations limited our ability to compensate the risks that arise from our exposition to the Dollar.

In the future, the Argentine Government may introduce new exchange controls and/or toughen the existing ones, create restrictions on transfers to other countries, restrictions to capital movements or other measures in response to an eventual capital flight or an important depreciation in the Peso, measures that can, in turn, affect our ability to access to the international capital markets. Such restrictions and measures may generate politic and social tensions and deteriorate the Argentine Government public finances, as it has occurred in the past, generating an adverse effect in the Argentine economic activity and, in consequence, adversely affecting our business and the result of our operations, and cause the market value of our ADSs and our Class B common shares to decline.

Moreover, we cannot guarantee that the measures that may be adopted by the current or any future government, such as expropriation, nationalization, forced renegotiation or modification of existing contracts, new taxation policies, changes in laws, regulations and policies affecting foreign trade and investments, restrictions to transfers to other countries or to capitals movement, or an important depreciation of the Peso will not have a material adverse effect on the Argentine economy and, as a consequence, adversely affect our financial condition, our results of operations or cause the market value of our ADSs and our Class B common shares to decline.

Argentine corporations may be restricted to make payments in foreign currencies

There are certain currently applicable restrictions in Argentina that affect the corporations’ ability to access to the exchange market (Mercado Único y Libre de Cambios, the “MULC”) to acquire foreign currency, transfer funds to other countries, make payments outside Argentina and other operations, requiring, in some cases, previous approval by the Central Bank.

The Argentine Government may impose or create further restrictions on the access to the MULC. In such case, the possibility of Argentine corporations to make payments outside Argentina and to comply with their obligations and duties may be affected.

We cannot predict how such current restrictions may evolve after this annual report, mainly regarding limitations to transfer funds outside the country. The Argentine Government may impose further exchange controls or restrictions to capital transfers and modify and adopt other policies that may limit or restrict our ability to access international capital markets, to make payments of principal and interests and other additional amounts outside the country (including payments relating to our notes), or affect in other ways our business and the results of our operations, or cause the market value of our ADSs and our Class B common shares to decline.

Exchange controls in an economic environment in which the access to local capital markets is restricted may cause and adverse effect in our activities, mainly in our ability to make payments of principal and/or interests of our notes in foreign currency. See “Item 10. Additional Information—Exchange Controls.”

Argentine public expenditure may generate negative consequences for the Argentine economy

Public expenditure increased significantly throughout the last decade in Argentina. The Argentine Government adopted several measures to finance its high public expenditure, including –among others-, using the Central Bank’s and ANSES’s resources to fund its financial needs, and implementing an expansionary monetary policy that increased inflation levels.

Primary deficit may increase in the future if public expenditure continues to increase faster than the Argentine Government’s incomes. A greater fiscal deficit may generate further complications to the Argentine Government’s ability to access the financial markets in the long term, and, at the same time, limit even more the argentine corporations’ access to those markets.

As of the date of this annual report, we cannot predict how the measures that the new administration has applied and may continue to apply will impact the Argentine economy, and, in turn, our business, our financial condition and the results of our operations.

The Argentine economy remains vulnerable to external shocks that could be caused by significant economic difficulties of Argentina’s major regional trading partners, particularly Brazil, or by more general “contagion” effects. Such external shocks and “contagion” effects could have a material adverse effect on Argentina’s economic growth, and consequently, our results of operations and financial condition

Although economic conditions in each country to country, investors’ perceptions regarding events occurring in other countries have in the past substantially affected, and may continue to substantially affect, capital flows into and investments in securities from issuers in other countries, including Argentina.Weak, flat or negative economic growth of any of Argentina’s major trading partners such as Brazil could adversely affect Argentina’s economic growth. Argentina’s economy is vulnerable to external shocks. For example, economic slowdowns, especially in Argentina’s major trading partners, led to declines in Argentine exports in the last few years. Specifically, fluctuations in the price of the commodities sold by Argentina and a significant revaluation of the Peso against the U.S. dollar could harm Argentina’s competitiveness and affect its exports. In addition, international investors’ reactions to events occurring in one market sometimes demonstrate a “contagion” effect in which an entire region or class of investment is disfavored by international investors.Economic or financial negative events that take place in other countries, could affect Argentine economy, subsequently affecting our operations and financial condition.

The economy of Brazil, Argentina’s largest export market and the principal source of imports to Argentina, has experienced heightened negative pressure due to the uncertainties stemming from the ongoing political crisis and extensive corruption investigations. The Brazilian economy contracted by 3.6% during 2016. Although the Brazilian economy slightly expanded by 1% in 2017, 1.1% in 2018 and 0.9% in 2019, a deterioration of economic conditions in Brazil may reduce demand for Argentine exports and increase demand for Brazilian imports. In October 2018, Jair Bolsonaro was elected president of Brazil. As a result, political uncertainty has increased in Brazil, in relation to future actions that may be taken by the president, which might include substantial economic reforms and changes in Brazil’s foreign policy, as was proposed during Jair Bolsonaro’s campaign. A further deterioration of economic conditions in Brazil could reduce the demand for Argentine exports and increase demand for Brazilian imports. There is a possibility that continued uncertainty with respect to Brazil’s economic and political conditions or the occurrence of an economic and political crisis in Brazil might result in an impact on the Argentine economy, and in turn, have a material adverse effect on our business, financial condition and result of operations. Additionally, there is uncertainty as to how the trade relationship between the Mercosur member States will unfold, in particular between Argentina and Brazil. We cannot predict the effect on the Argentine economy and our operations if trade disputes arise between Argentina and Brazil, or in case either country decided to exit the Mercosur.

Luis Alberto Lacalle Pou was elected President of the Oriental Republic of Uruguay after winning the elections on November 24, 2019. Politic uncertainties may arise due to a change in the governing party after 15 years, and may adversely affect Argentina, that considers Uruguay a key ally.

Since October 2019, Chile suffered several demonstrations claiming the adoption of new economic policies and a constitutional amendment. Those demonstrations generated major economic damages, such as a currency depreciation, job losses and several deaths among others.

On October 20, 2019, the Plurinational State of Bolivia held elections. Evo Morales was elected president for the third time in a row, violating Bolivia’s Constitution. After major accusations of fraud and massive demonstrations, Morales resigned to the presidency, the Bolivian Congress annulled the election and called for new elections for President, Vice-President, members of both legislative chambers and members of the Electoral Supreme Court (Tribunal Supremo Electoral de Bolivia).

Financial and securities markets in Argentina are also influenced by economic and market conditions in other markets worldwide. U.S. monetary policy has significant effects on capital inflows and asset price movements in emerging market economies. Increases in U.S. interest rates result in the appreciation of the U.S. dollar and decreases in prices for raw materials, which can adversely affect commodity-dependent emerging economies.

On November 8, 2016, Donald J. Trump was elected President of the United States and he assumed office in January 2017. The results of the presidential election have created significant uncertainty about the future relationship between the United States and other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade between the United States and other nations. Even though President Trump's protectionist measures are not, for the time being, aimed at Argentina, we cannot predict how they will evolve, nor can we predict the effect that the same or any other measure taken by the Trump administration could cause on global economic conditions and the stability of global financial markets. Furthermore, the ongoing trade tensions between United States and China due to tariffs placed on goods traded between them, may have a potential impact in trade-dependent countries such as Argentina.

During August 2018, an increase in inflation and a sustained deficit in current accounts, as well as the protectionist measures taken by the United States which included the doubling of the tariffs on steel and aluminum from Turkey, caused a collapse of the Turkish lira against the Dollar. Such collapse triggered a wave of sales of assets from emerging markets and the significant drop in the value of shares from emerging markets, generating a contagion effect in international markets and several stock exchanges in the world, including Argentina.

Additionally, a slowing of China’s GDP growth has led to a reduction in exports to China, which in turn has caused oversupply and price declines in certain commodities. Decreases in exports may have a material adverse effect on Argentina’s public finances due, among others, to a loss of tax on exports, and cause an imbalance in the country’s exchange market.

In addition, the global macroeconomic environment is facing challenges. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa and over the conflicts involving Iran, Ukraine, Syria and North Korea. Moreover, political and social crises arose in several countries of Latin America during 2019, as the economy in much of the region has slowed down after almost a decade of sustained growth, among other factors. There have also been concerns on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes, and the possibility of a trade war between the United States and China.

Moreover, United Kingdom exited the European Union (“Brexit”) on January 31, 2020 and is currently undergoing a transition period ending on December 31, 2020, the long-term effects of which remain uncertain. The medium and long term implications of Brexit could adversely affect European and worldwide economic and market conditions and could contribute to instability in global financial and foreign exchange markets. Finally, the novel coronavirus has caused significant social and market disruption in recent months, which are also expected to have an adverse impact in Argentina’s economy. See “—Developments relating to the novel coronavirus may have a material adverse impact on our business operations, financial condition or results of operations.”.

There can be no assurance that the Argentine financial system and securities markets will not be adversely affected by policies that may be adopted by foreign governments or Argentine Government in the future, or by events in the economies of developed countries or in other emerging markets.

Finally, international investors’ reactions to events occurring in one market may generate a “contagion” effect by which an entire region or class of investment is disfavored by international investors. Argentina could be adversely affected by negative economic or financial developments in other emerging and developed countries, which in turn may have material adverse effect on the Argentine economy and, indirectly, on our business, financial condition and results of operations, and the market value of our ADSs and Class B common shares.

Developments relating to the novel coronavirus may have a material adverse impact on our business operations, financial condition or results of operations.

In late December 2019 a notice of pneumonia originating from Wuhan, Hubei province (COVID-19, caused by a novel coronavirus) was reported to the World Health Organization, with cases soon confirmed in multiple provinces in China, as well as in other countries. The virus rapidly spread globally and, as of the date of this annual report, has affected more than 150 countries and territories around the world, including Argentina. Several measures have been undertaken by the Argentine Government and other governments around the globe, including the use of quarantine, screening at airports and other transport hubs, travel restrictions, suspension of visas, nation-wide lockdowns, closing of public and private institutions, suspension of sport events, restrictions to museums and tourist attractions and extension of holidays, among many others.

On March 12, 2020 the Executive Branch of the Argentine Government issued Decree No. 260/2020, which extended the public health emergency for a period of one year and established a mandatory fourteen days quarantine for the following individuals: (i) suspected cases, including individuals with fever and respiratory symptoms and individuals who had traveled in the last few days within affected areas or had been in contact with confirmed positive or probable positive coronavirus individuals, (ii) confirmed cases, (iii) those who had arrived to Argentina after March 12, 2020 having traveled through affected areas, and (iv) those who had arrived to Argentina in the last fourteen days prior to March 12, 2020 having traveled through affected areas. It also prohibited incoming flights from affected areas for the term of 30 days.

On March 20, 2020 the Executive Branch issued Decree No. 297/2020, which established a mandatory and preventive social isolation effective as of March 20, 2020 until March 31, 2020. On March 31, 2020 the Executive Branch issued Decree No. 325/2020 which extended the mandatory and preventive social isolation until April 12, 2020, which was further extended until April 26, 2020 pursuant to Decree No. 335/2020 issued on April 11, 2020 and again it was extended until May 10, 2020 with Decree No. 408/2020 of April 26, 2020 according to which the provincial governors may define exceptions to preventive and compulsory social isolation, fulfilling the requirements established in the decree. The Decree No. 297/2020 expressly stated that minimal and essential movement would be allowed only for the provision of food, medicine and cleaning products. Some individuals, such as healthcare personnel, employees attending supermarkets, proximity stores and pharmacies, among others, are exempted from the isolation measure.

On the same date, the ENRE issued Resolution No. 3/2020 approving (i) the suspension of customer service, and, consequently, the closure of commercial offices during the quarantine, (ii) the implementation of an electronic system of commercial attention and claims, and (iii) the minimal and essential movement required for the continuity of the essential provision of the public electricity distribution services.

In addition to the aforementioned regulations, on March 25, 2020 the Executive Branch issued Decree No. 311/2020, prohibiting public utility companies, such as Edenor, to discontinue their services to certain users who fail to pay three consecutive or alternate bills due as from March 1, 2020, for a term of 180 days. Specifically, regarding electric energy, the Decree establishes that users that have a prepaid system, shall be provided with the service during the term of 180 days even if they fail to make the corresponding recharges. Moreover, on March 31, 2020, the Executive Branch issued Decree No. 329/2020 which established the prohibition to dismiss employees without cause and dismiss and suspend employees due to work slowdown or force majeure for a 60-day period beginning March 31, 2020.

To date, the outbreak of the novel coronavirus has caused significant social and market disruption. For example, the Dow Jones declined by about 28% between February 11 and March 12, 2020. The long-term effects on the global economy, the Argentine economy and the Company of the coronavirus pandemic, are difficult to assess or predict, and may include a decline in market prices (including the market prices of our Class B Common Shares and ADSs), risks to employee health and safety, and reduced sales in geographic locations impacted.

Any prolonged restrictive measures put in place in order to control an outbreak of a contagious disease or other adverse public health development such as the ongoing COVID-19 outbreak, may have a material and adverse effect on our business operations, financial condition or results of operations including that (i) our earnings may be reduced as our commercial offices must remain closed until the end of the quarantine and customers may face difficulties to pay tariffs, (ii) demand from non-residential customers is expected to be lower, which may not be offset by the demand of residential customers, (iii) the Company’s chain of payments is expected to be interrupted across our operations, (iv) we may not be able to comply with the investment plan as required by ENRE, which may lead to fines and penalties and (v) impairment of long-lived assets. We may also be affected by the need to implement policies limiting the efficiency and effectiveness of our operations, including home office policies. For more information, see “Item 5— Operating and Financial Review and Prospects—Novel Coronavirus (COVID-19).”

It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term. Additionally, we cannot predict how the disease will evolve in Argentina, nor anticipate what additional restrictions the Argentine government may impose. However, we expect COVID-19 to have a significant adverse effect on the world economy, which will in turn negatively affect Argentina’s economy.

The Company is currently considering available alternatives to mitigate the effects this outbreak may have on its operations and undergoing projects, as well as with regards to measures adopted by the Argentine Government, which so far have resulted in a slowdown in economic activity that will further adversely affect economic growth in Argentina in 2020 and possibly 2021, to a degree that we cannot quantify as of the date of this annual report. For more information on the measures adopted by the Argentina Goverment, see “Item 4.A.—Recent Developments in Argentina—Measures Designed to Address the COVID-19 Outbreak.”

The application of certain laws and regulations could adversely affect our results of operations and financial condition

Law No. 26,854, which regulates the procedure applicable to injunctions that are requested against or by the Argentine Government or any of its decentralized entities, was promulgated on April 30, 2013 as part of a judicial reform bill approved by the Argentine Congress. The principal changes implemented pursuant to Law No. 26,854 include: (i) prior to issuing a ruling on injunctions requested against the Argentine Government or decentralized entities, judges must request a report on the relevant matters from the competent administrative agency (the "Preliminary Report"), within five days in ordinary proceedings and three days in abbreviated proceedings and in amparo actions. Also, judges are authorized to request an opinion on the matter from the relevant representative of the General Prosecuting Office, (ii) judges are permitted to order interim measures before ruling on the injunction request, in the event that "exceptional circumstances, objectively insurmountable" are present. Such interim measures are effective until the competent administrative authority has produced the Preliminary Report or until the term for producing such report has expired, and (iii) injunctions that are ordered against the Argentine Government or its decentralized entities must have a "reasonable term of effectiveness" (a maximum term of six months if the injunction is granted within the framework of an ordinary judicial procedure or three months if it is an abbreviated proceeding or anamparo action). In addition, Law No. 26,855, which became effective on May 27, 2013, modified the structure and functions of the Argentine Consejo de la Magistratura (judicial council), which has the authority to appoint judges, present charges against them and suspend or remove them. As of the date of this annual report, several aspects of this legislation have been struck down as unconstitutional by the Argentine Supreme Court.

On August 7, 2014, Law No. 26,944 on State Responsibility was enacted to regulate the liability of the Argentine Government and public officers, including state liability for unlawful and lawful actions Such law governs the responsibility of the Argentine Government regarding the damages that its activity or inactivity may cause to individuals’ properties or rights. Additionally, Law No. 26,944 establishes that the Argentine Government’s responsibility is objective and direct, that the provisions of the civil and commercial codes are not applicable to the actions of the Argentine Government in a direct or subsidiary manner and that no dissuasive financial penalties may be imposed on the Argentine Government, its agents or officers. Additionally, Law No. 26,944 provides that the Argentine Government shall not be liable for the damages caused by public services concessionaires.

On September 18, 2014, the Argentine Congress enacted Law No. 26,991 amending Law No. 20,680 (the “Supply Law”), which became effective on September 28, 2014, to increase control over the supply of goods and provision of services. The Supply Law applies to all economic processes linked to goods, facilities and services which, either directly or indirectly, satisfy basic consumer needs (“Basic Needs Goods”) and grants a broad range of powers to its enforcing agency. It also grants the enforcing agency the power to order the sale, production, distribution or delivery of Basic Needs Goods throughout Argentina in case of a shortage of supply. The Supply Law includes the ability of the Argentine Government to regulate consumer rights under Article 42 of the Constitution and permits the creation of an authority to maintain the prices of goods and services (the “Observer of Prices of Goods and Services”). The Supply Law, as amended: (i) requires the continued production of goods to meet basic requirements; (ii) creates an obligation to publish prices of goods and services produced and borrowed; (iii) allows financial information to be requested and seized; and (iv) increases fines for legal entities and individuals. Additionally, on September 18, 2014 the Argentine Congress enacted Law No. 26,993, amending, among other laws, Law No. 25,156, which provides (i) the creation of a preliminary system where consumers may request a settlement of their complaints with companies, (ii) the incorporation of a new branch within the Judicial Power, namely the “National Courts on Consumer Relations” and (iii) the amendment of Law No. 24,240 (the “Consumer Defense Law”). Such reforms and creation of the Observer of Prices of Goods and Services could adversely affect our operations.

On October 1, 2014, the Argentine Congress approved the reform, update and unification of the National Civil and Commercial codes. A single new National Civil and Commercial Code became effective on August 1, 2015. In addition, more recently the Argentine Congress has passed certain laws such as those reforming the pension system and establishing corporate criminal liability for certain corrupt practices and a tax law reform. On December 21, 2019, the Argentine Congress adopted the Productive Reactivation Law, which covers a wide range of political and economic areas and establishes measures that will significantly impact the Argentine economy. See “—Economic and political developments in Argentina, and future policies of the Argentine government may affect the economy as well as the operations of the energy distribution industry, including Edenor.”

The implementation of the aforementioned legislation has modified Argentina’s legal system. Future changes in applicable laws and regulations (including as a result of a change in government administration), administrative or judicial proceedings, including potential future claims by us against the Argentine Government, cannot be predicted and we cannot assure you that such changes will not adversely affect our business, financial condition and results of operations.

The Argentine economy and finances may be adversely affected as a consequence of a decrease in the international prices of commodities that Argentina exports

The commodities market is characterized by its volatility. Commodities exports have contributed significantly to the Argentine Government’s incomes. Subsequently, the Argentine economy has remained relatively dependent on the price of its exports (mainly soy). During 2018, Argentina suffered a huge drought –presumably the biggest drought in the last 50 years-. The effects of the drought in the agriculture caused significant economic problems to Argentina, with decreases in the soy and corn harvests that generated damages for approximately U.S.$6 billion.

A sustained decrease in the international price of the main commodities exported by Argentina, or any future climate event or condition may have adverse effect in the agriculture, and therefore in the Argentine Government’s incomes and its capacity to comply with the payments of its public debt, eventually generating recessive or inflationary pressures, thus affecting our business, financial situation and the results of our operations.

Current investigations being conducted on corruption in Argentina could have an adverse impact on the development of the Argentine economy and on investor confidence

As of the date of this annual report, several Argentine businesspersons, mainly related to the public works, and former government officials of the Fernández de Kirchner administration are being investigated for inappropriate gifts and unlawful association. On September 17, 2018, prosecution for unlawful association began against the former president –and current Vice-president- of Argentina, Cristina Fernández de Kirchner, and several businesspersons.

Depending on the results of such investigations and the time it takes to complete them, the companies involved could face, among other consequences, a decrease in their credit rating, claims from their investors, as well as restrictions on financing through capital markets. These adverse effects could hinder the ability of these companies to meet their financial obligations on time. In relation to the abovementioned, the lack of future financing for these companies could affect the realization of the projects or works that are currently in execution.

Likewise, the effects of these investigations or any future investigation could affect the levels of investment in infrastructure in Argentina, as well as the continuation, development and completion of public works projects and public-private participation (PPP) projects, which could ultimately lead to lower growth of the Argentine economy.

We cannot estimate the impact that these investigations could have on the Argentine economy. Similarly, the duration of the corruption investigations cannot be predicted, nor can it be determined what other companies might be involved or how far-reaching the effects of these investigations might be, particularly in the energy sector, or if there will be any other future investigations in this or other industry, which may negatively impact the Argentine economy. In turn, the decrease in investor confidence resulting from any of these, among other issues, could have a significant adverse effect on the growth of the Argentine economy, which could, in turn, harm our business, our financial condition and the results of our operations, and affect the trading price of our Class B common shares and ADSs.

Any downgrade in the credit rating or rating outlook of Argentina could adversely affect both the rating and the market price of our ADS and our Class B common shares

Argentina’s long-term debt denominated in foreign currency is currently rated “Ca” by Moody’s, “CCC-” by S&P and “CC” by Fitch. On December 30, 2019, Fitch decided to raise Argentina’s long-term sovereign credit ratings from “RD” to “CC,” primarily as a result of the presidential elections held on December 2019 and the fact that President Alberto Fernández took steps that could support Argentina´s financial situation while engaging in discussions with debt holders, and on January 8, 2020, S&P decided to maintain its negative outlook of Argentina’s long-term sovereign credit rating, which, according to S&P, reflects the prominent downside risks to timely and full payment of debt amid stressed economic and financial market dynamics. Moreover, on April 3, 2020, Moody’s decided to downgrade Argentina’s long-term sovereign credit rating to “Ca” from “Caa2” and, in line with that lowering, on April 13, 2020 our shares were downgraded to category “3” from “2”, with a negative perspective. There can be no assurance that Argentina’s credit rating or rating outlook will not be downgraded in the future, which could have an adverse effect both on the rating and the market price of our ADS and Class B common shares.

Risks Relating to the Electricity Distribution Sector

The Argentine Government has intervened in the electricity sector in the past, and may continue intervening

Historically, the Argentine Government has exerted a significant influence on the economy, including the energy sector, and companies such as us that operate in such sector have done so in a highly regulated context that aims mainly at guaranteeing the supply of domestic demand.

To address the Argentine economic crisis in 2001 and 2002, the Argentine Government adopted the Public Emergency Law and other regulations, which made a number of material changes to the regulatory framework applicable to the electricity sector. These changes severely affected electricity generation, distribution and transmission companies and included the freezing of nominal distribution margins, the revocation of adjustment and inflation indexation mechanisms for tariffs, a limitation on the ability of electricity distribution companies to pass on to the user increases in costs due to regulatory charges and the introduction of a new price-setting mechanism in the wholesale electricity market (the “WEM”) which had a significant impact on electricity generators and generated substantial price differences within the market. From time to time, the Argentine Government intervened in this sector by, for example, granting temporary nominal margin increases, proposing a new social tariff regime for residents of poverty-stricken areas, removing discretionary subsidies, creating specific charges to raise funds that were transferred to government-managed trust funds that finance investments in generation and distribution infrastructure and mandating investments for the construction of new generation plants and the expansion of existing transmission and distribution networks.

On December 17, 2015, the Argentine Government issued Decree No. 134/15 declaring the emergency of the national electricity sector which was in effect until December 31, 2017 and instructing the ME&M to adopt any measure the ME&M deemed necessary regarding the generation, transmission and distribution segments, to adjust the quality and guarantee the provision of electricity.

During 2017, the Argentine Government, through the relevant agencies enacted several resolutions to establish the penalties regime and adjust tariffs. On February 1, 2017, the RTI process was completed and a new tariff scheme for the following five year period was enacted. However, on December 21, 2019, the Argentine Congress adopted the Productive Reactivation Law, which adopts measures that will significantly impact the Argentine economy, including the declaration of the public emergency in tariffs and energy matters until December 31, 2020, and the delegation to the Federal Executive Power of certain powers normally reserved to Congress or otherwise not within the purview of the PEN (including the ability to make determinations in the renegotiation of public tariffs).

We cannot assure you that certain other regulations or measures that may be adopted by the Argentine Government will not have a material adverse effect on our business and results of operations or on the market value of our shares and ADSs, or that the Argentine Government will not adopt further regulations in the future that may increase our obligations, including increased taxes, unfavorable alterations to our tariff structures or remuneration scheme and other regulatory obligations, compliance with which would increase our costs and may have a direct negative impact on our results of operations and cause the market value of our ADSs and Class B common shares to decline. See “Item 4. Information on the Company—Our Business Overview—Edenor Concession.”

The Argentine Government signed an agreement with the Province of Buenos Aires and the City of Buenos Aires for the transfer of the public service of electricity distribution.

Pursuant to Law No. 27,467, which enacted the 2019 Federal Budget of Expenditures and Resources, the Executive Branch was instructed to promote the transfer of Edenor’s jurisdiction to the jurisdiction of the Province of Buenos Aires and the City of Buenos Aires as from January 1, 2019 and the creation of a new oversight body. On February 28, 2019, the Argentine Government, the Province of Buenos Aires and the City of Buenos Aires entered into an agreement for the transfer of the public service of electricity distribution duly awarded to Edenor under the Concession Agreement (as defined below) entered into by the Argentine Government (including the Concession Agreement), to the joint jurisdiction of the Province of Buenos Aires and the City of Buenos Aires. Pursuant to such agreement, the Province of Buenos Aires and the City of Buenos Aires will create a new entity in lieu of the ENRE, in charge of controlling and regulating the distribution service. It was also agreed that the Federal Government shall be the sole responsible for any and all debts and credits relating to the distribution service awarded to Edenor which cause is prior to February 28, 2019. As of the date of this annual report, certain major issues related to such transfer remain pending, including, among others, the continuation of the existing Concession Agreement as is; whether the federal legal and regulatory framework shall continue to apply or not; and the settlement of claims and debts between Edenor and the Federal Government resulting from the contractual transition period ended on January 31, 2016. However, on December 21, 2019 the Argentine Congress passed the Productive Reactivation Law which, among other things, suspended the transfer of Edenor’s jurisdiction to the jurisdiction of the Province of Buenos Aires and the City of Buenos Aires, reassuming the ENRE the jurisdiction over the public service of electricity distribution provided by Edenorand Edesur. Although as of the date of this annual report such transfer is suspended, we cannot assure whether it will be consummated and, if so, whether any action or omission from the transferees following the consummation of such transfer will not have an adverse effect on our business, financial condition or results of operations or would not have a negative impact on the market value of our ADSs and Class B common shares.

There is uncertainty as to what other measures the Argentine Government may adopt in connection with tariffs on public services and their impact on the Argentine economy

As explained in other risk factors in this annual report, following the economic crisis of 2001-2002, the subsequent freeze on electricity rates in Pesos and the significant depreciation of the Argentine Peso against the U.S. Dollar, there was a lack of investment in the distribution capacities of electricity and, at the same time, demand for electricity increased substantially.

In response, the Macri administration announced several measures, including the revision of subsidy policies, Decree No. 134/2015 of December 16, 2015, which placed the national electricity system in a state of emergency until December 31, 2017 and Decree No. 367/2016 of February 16, 2016, which instructed the ministries, including the ME&M to continue the procedures related to the renegotiation of contracts related to the provision of public services and their RTI, among which are the distribution of electricity.

On February 1, 2017, the RTI process was completed. Through Resolution No. 63/17 (amended by ENRE Resolutions No. 82/17 and No. 92/17), the ENRE approved a rate of return for us of 12.46% before taxes. The resulting income was determined by applying the Net Replacement Value (“NRV”) methodology, over a slightly lower base capital than the one we had submitted in our proposal, reaching an amount of Ps.34 billion. The difference with our proposal was mainly explained by the fact that the ENRE excluded the fully depreciated assets from the regulatory net asset base. Moreover, the ENRE stated that our acknowledged remuneration as of December 2015 was Ps.12.5 billion, which adjusted to February 2017 reached to Ps.17.2 billion. The ENRE also established a non-automatic mechanism to adjust our tariffs, as it had done under the original Concession Agreement and the Adjustment Agreement (as defined below), in order to preserve the economic and financial sustainability of the concession in the event of price fluctuations in the economy. This mechanism has a biannual basis and includes a combined formula of wholesale and consumer price indexes (WPI, CPI and salaries increases) which trigger the adjustment of tariffs when the result is above 5%.

Edenor filed an administrative appeal (recurso de reconsideración) against ENRE´s Resolution No. 63/17. On October 25, 2017, the ENRE, through Resolution No. 524/17, rejected the appeal filed by Edenor.

On January 31, 2018, the ENRE issued Resolution No. 33/18 which approved the new distribution cost for Edenor to be applied as from February 1, 2018 and the new tariff scheme.

Furthermore, such resolution approved the new adjustments to own distribution costs (“CPD”) (last stage of 17% according to Resolution No 63/17, including the inflation adjustment of 11.9% for the period July 2017-December 2017 and a stimulus factor “E” of negative 2.51%) and determined the deferred income to be recovered in 48 instalments for a total amount of Ps.6,343.4 million. Additionally, it reported that the price of the average tariff reached Ps.2.4627/ KWh.

Notwithstanding the measures adopted recently, there is uncertainty as to what measures the Argentine Government may adopt in connection with tariffs, whether tariffs will be updated from time to time to reflect an increase in operating costs, and their impact on the Argentine economy.

Electricity distributors were severely affected by the emergency measures adopted during the economic crisis, many of which remain in effect

Distribution tariffs include a regulated margin that is intended to cover the costs of distribution and provide an adequate return over the distributor’s asset base. Under the Convertibility Regime, which established a fixed exchange rate of one Peso per U.S. Dollar, distribution tariffs were calculated in U.S. Dollars and distribution margins were adjusted periodically to reflect variations in U.S. inflation indexes. However, the Public Emergency Law, which came into effect in January 2002, froze all distribution margins, revoked all margin adjustments provisions in distribution concession agreements and converted distribution tariffs into Pesos at a rate of Ps.1.00 per U.S.$1.00. These measures, coupled with the effect of high inflation and the depreciation of the Peso, led to a decline in distribution revenues and an increase of distribution costs in real terms, which could no longer be recovered through adjustments to the distribution margin. This situation, in turn, led many public utility companies, including us and other important distribution companies, to suspend payments on their commercial debt (which continued to be denominated in U.S. Dollars despite the pesification of revenues), effectively preventing these companies from obtaining further financing in the domestic or international credit markets and making additional investments.

In the past, the Argentine Government granted temporary and partial relief to some distribution companies, including limited increases in distribution margins, a temporary cost adjustment mechanism which was not fully implemented and the ability to apply certain additional charges to users.

On December 21, 2019, the Argentine Congress adopted the Productive Reactivation Law, which included the declaration of the public emergency in tariffs and energy matters (among others) and the delegation to the Federal Executive Power of certain powers normally reserved to Congress or otherwise not within the purview of the Federal Executive Power (including the ability to make determinations in the renegotiation of public tariffs). Any measures that may be taken as a result of the enactment of the Productive Reactivation Law and the declaration of public emergency, coupled with the economic crisis, may have an adverse impact on the Company. Our inability to cover the costs or to receive an adequate return on our asset base may further adversely affect our financial condition and results of operations.

Electricity demand may be affected by tariff increases, which could lead distribution companies, such as us, to record lower revenues

From 2013 through 2018, electricity demand in Argentina increased by 6%, which in part reflects the relative low cost, in real terms, of electricity to users due to the freezing of distribution margins, the establishment of subsidies in the purchase price of energy and the elimination of the inflation adjustment provisions in distribution concessions, coupled with the depreciation of the Peso and inflation through 2018.

We cannot make any assurance that recent increases or any future increases in the cost of electricity will not have a material adverse effect on electricity demand or result in a decline in collections from users. In this respect, we cannot assure you that these measures or any future measure will not lead electricity companies, like us, to record lower revenues and results of operations, which may, in turn, have a material adverse effect on the market value of our ADSs.

If the demand for energy is increased suddenly, the difficulty in increasing the capacity of distribution companies in a short or medium term, could adversely affect the Company, which in turn could result in customer complaints and substantial fines for any interruptions

In recent years, the increase in electricity demand was greater than the structural increase in electricity distribution capacities, which led to power shortages and disruptions, in certain occasions. A sustained increase in electricity demand could generate future shortages. In addition, the condition of the Argentine electricity market has provided little incentive to generators and distributors to further invest in increasing their generation and distribution capacity, respectively, which would require material long-term financial commitments. Although there were several investments in generation during 2017, 2018 and 2019, which would increase the installed power capacity in the coming years, the highest density of investments was concentrated in the Greater Buenos Aires area. It is still necessary to make several investments in the transmission and distribution system to guarantee the delivery of electricity to the user and reduce the frequency of interruptions. During December 2013, an increase in demand for electricity resulted in energy shortages and blackouts in Buenos Aires and other cities around Argentina.

Additionally, according to Argentine law, distribution companies, such as us, are responsible to their users for any disruption in the supply of electricity. Consequently, customers can direct their claims to the distribution companies. Also, distribution companies are subject to fines and penalties for service disruptions caused by energy shortages, unless the respective Argentine authorities determine that energy shortages constitute force majeure events. As a result, we could face user claims and fines and penalties for service disruptions caused by energy shortages unless the relevant Argentine authorities determine that energy shortages constitute force majeure. Additionally, disruptions in the supply of electricity could expose us to intervention by the Argentine Government, which warned of such possibility during the blackouts of December 2013. We cannot assure that we will not experience a lack in the supply of energy or that such claims, fines, penalties or government intervention will not have a materially adverse effect on our financial condition and results of operations and cause the market value of our ADSs and Class B common shares to decline.

Risks Relating to Our Business

We operate our business pursuant to our Concession Agreement granted by the Argentine Government, the revocation or termination of which would have a material adverse effect on our business.

We conduct our business pursuant to our Concession Agreement granted by the Argentine Government. Such agreement contains several requirements regarding the operation of our business and compliance with laws and regulations. Compliance with our obligations under our Concession Agreement is, in certain cases, secured by a pledge of our shares in favor of the Argentine Government. Accordingly, upon the occurrence of specified events of default under our Concession Agreement, the Argentine Government would be entitled to foreclose on its pledge of our Class A common shares to a third party. Such sale would have a severe negative impact on our ability to operate a material portion of our business, and as a result, our results of operations would be materially adversely affected. Finally, our Concession Agreement also generally provides for termination in the case of our insolvency or bankruptcy. If our Concession Agreement is terminated or if the Argentine Government forecloses its pledge over Class A common shares, we may not be able to continue to operate as a going concern, and in turn our consolidated results of operations would be materially adversely affectedand the market value of our Class B common shares and ADSs could decline.

If we are not able to effectively hedge our currency risk in full and a depreciation of the Argentine Peso occurs, our results of operations and financial condition could be materially adversely affected

Our revenues are mainly collected in Pesos, although the remuneration scheme (i) set forth by the Electric Energy Secretariat (“SEE”) Resolution No. 1/19 establishes U.S. Dollar-denominated prices, but the payment is made in Pesos by applying the Central Bank’s exchange rate effective on the day before the expiration date (although this remuneration scheme was significantly altered by the Energy Secretariat Resolution No. 31/20 which came into force in February 2020 and pesified the remuneration scheme applied to energy sold in the Argentine spot market), and (ii) for other contracts withCompañía Administradora del Mercado Mayorista Eléctrico Sociedad Anónima (“CAMMESA”) established U.S. Dollar -denominated prices but the payment is made in Pesos by applying the Central Bank’s exchange rate effective on the last business day of the month of the applicable transaction, adjusted through credit or debit notes, as appropriate, to consider the Central Bank’s exchange rate of the day before the expiration date, in accordance with CAMMESA’s procedures. As a result, we are exposed to an exchange rate risk between the collection date and the payment date (in the event CAMMESA does not pay at the expiration date) of U.S. Dollars-denominated financial indebtedness. In addition, a significant portion of our existing financial indebtedness is denominated in U.S. Dollars, which exposes us to the risk of loss from the depreciation of the Peso. During 2019, our hedging contracts did not cover all of our exposure to such depreciation. If we are not able to effectively hedge all or a significant portion of our currency risk exposure, a depreciation of the Peso, may significantly increase our debt service burden, which, in turn, may have a material adverse effect on our financial condition and results of operations.

Downgrades in our credit ratings could have negative effects on our funding costs and business operations

Credit ratings are assigned to the Company. The credit ratings are based on information furnished by us or obtained by the credit rating agencies from independent sources and are also influenced by the credit ratings of Argentine Government bonds and general views regarding the Argentine financial system as a whole. The credit ratings are subject to revision, suspension or withdrawal by the credit rating agencies at any time. A downgrade, suspension or withdrawal in our credit ratings could result in, among others, the following: (i) increased funding costs and other difficulties in raising funds; (ii) the need to provide additional collateral in connection with financial market transactions; and (iii) the termination or cancellation of existing agreements. As a result, our business, financial condition and results of operations could be materially and adversely affected.

Our business is subject to risks arising from natural disasters, catastrophic accidents and terrorist attacks. Additionally, our businesses are subject to the risk of mechanical or electrical failures and any resulting unavailability may affect our ability to fulfill our contractual commitments and thus adversely affect our business and financial performance

The electric power distribution infrastructure that we rely on, may be damaged by flooding, fires, earthquakes and other catastrophic disasters arising from natural or accidental or intentional human causes. We could experience severe business disruptions, significant decreases in revenues based on lower demand arising from catastrophic events, or significant additional costs to us not otherwise covered by business interruption insurance clauses. There may be an important time lag between a major accident, catastrophic event or terrorist attack and our definitive recovery from our insurance policies, which typically carry non-recoverable deductible amounts, and in any event are subject to caps per event. In addition, any of these events could cause adverse effects on the energy demand of some of our customers and of consumers generally in the affected market. Some of these considerations, could have a material adverse effect on our business, financial condition and our result of operations.

Additionally, our assets are subject to the risk of mechanical or electrical failures and may experience periods of unavailability affecting our ability to fulfill our contractual commitments. Any unplanned unavailability of our assets may adversely affect our financial condition or results of operations and our ability to fulfill our contractual commitments, so we could be subject to fines and penalties. For example, in June 2019, Argentina suffered a general blackout which hindered the operation of generation facilities. Although our facilities did not suffer any damage, we cannot assure that any other event in the Argentine network will not affect our facilities and consequently their availability to fulfill our contractual commitments and our operational results.

Our operations could cause environmental risks and any change in environmental laws could increase our operating costs

Some of our operations are subject to environmental risks that could arise unexpectedly and cause material adverse effects on our results of operations and financial condition. In addition, the occurrence of any of these risks could lead to personal injury, loss of life, environmental damage, repair and expenses, equipment damage and liability in civil and administrative proceedings. We cannot assure you that we will not incur additional costs related to environmental issues in the future, which could adversely affect our results of operations and financial condition. In addition, we cannot ensure that our insurance coverage is sufficient to cover the losses that could potentially arise from these environmental risks.

In addition, we are subject to a broad range of environmental legislation, both in Argentina. Local, provincial and national authorities in Argentina may implement new environmental laws and regulations and may require us to incur higher costs to comply with new standards. The imposition of more stringent regulatory and permit requirements in relation to our operators in Argentina could significantly increase the costs of our activity.

We cannot predict the general effects of the implementation of any new environmental laws and regulations on our financial condition and results of operations.

Failure or delay to negotiate further improvements to our tariff structure, including increases in our distribution margin, and/or to have our tariffs adjusted to reflect increases in our distribution costs in a timely manner or at all, affected and may continue to affect our capacity to perform our commercial obligations and could also have a material adverse effect on our ability to perform our financial obligations

Since the execution of the agreement entered into between us and the Argentine Government on February 13, 2006 relating to the adjustment and renegotiation of the terms of our concession (Acta Acuerdo sobre la Adecuación del Contrato de Concesión del Servicio Público de Distribución y Comercialización de Energía Eléctrica or the “Adjustment Agreement”) and as required by the Argentine Government, we were engaged in an RTI with the ENRE through February 1, 2017.

The Adjustment Agreement contemplated a cost adjustment mechanism for the transitional period during which the RTI process was being conducted. This mechanism, known as the Cost Monitoring Mechanism (“CMM”), required the ENRE to review our actual distribution costs every six months (in May and November of each year) and adjust our distribution margins to reflect variations of 5% or more in our distribution cost base. We could also request that the ENRE apply the CMM at any time that the variation in our distribution cost base was at least 10% or more. Any adjustments, however, were subject to the ENRE’s assessment of variations in our costs, and the ENRE’s approval of adjustments were not sufficient to cover our actual incremental costs in a timely manner. During such time, even when the ENRE approved adjustments to our tariffs, there was a lag between the time when we actually experienced increases in our distribution costs and the time when we received increased income following the corresponding adjustments to our distribution margins pursuant to the CMM.

In this context and in light of the situation that affected the electricity sector, the ENRE issued Resolution No. 347/12 in November 2012, which established the application of fixed and variable charges that allowed the Company to obtain additional revenue as from November 2012 through 2016. However, changes made by Resolution No. 250/13 and Notes No. 6,852/13, No. 4,012/14, No. 486/14 and No. 1,136/14 of the SE and additional revenue obtained through Resolution No. 347/12 were insufficient to make up for our operating deficit in 2014, due to the constant increase in operating costs.

In March 2015, Resolution No. 32/15 of the former SE granted us a temporary increase in income through funds provided by CAMMESA applicable retroactively as from February 1, 2015 through February 1, 2016, to cover costs and investments associated with the regular provision of the public service of distribution of energy on account of the RTI.

In January 2016, the ME&M issued Resolution No. 7/16, pursuant to which the ENRE implemented a VAD adjustment to the tariff schedule on account of the future RTI in effect as of February 1, 2016.

In addition, such resolution: (i) abrogated the Energy Rational Use Program (Programa de Uso Racional de la Energía Eléctrica or “PUREE”); (ii) repealed Resolution No. 32/15 as from the date the ENRE resolution implementing the new tariff schedule becomes effective; (iii) discontinued the application of mechanisms that imply the transfer of funds from CAMMESA in the form of loan agreements with CAMMESA; (iv) ordered the implementation of the actions required to terminate the trusts created pursuant to Resolution No. 347/12 of the ENRE and (v) prohibited the distribution of dividends in accordance with Section 7.04 of the Adjustment Agreement.

However, pursuant to Resolution No. 7/16, the ENRE issued Resolution No. 1/16 establishing a new tariff structure, which remained in force (with certain suspensions as a result of injunctions, which are no longer in effect) until February 2017, when the RTI process was completed.

Prior to the completion of the RTI process, several regulatory mechanisms, programs or changes were implemented from time to time by the ENRE to adjust our tariffs to reflect increased costs. Any requested adjustments were usually subject to the ENRE’s assessment of variations in our costs, and not sufficient to cover our actual incremental costs in a timely manner.

On April 1, 2016, the ENRE issued Resolution No. 55/16, which approved the program for the review of the distribution tariff scheme, establishing the criteria and methodologies for completing the RTI process.

On September 5, 2016, pursuant to Resolution No. 55/16, we submitted our rate schedule proposal for the following five-year period. On October 28, 2016, a public hearing was held to provide information and listen to the public opinion on the RTI.

The RTI was completed on February 1, 2017, on which date the ENRE issued Resolution No. 63/17, through which it approved a new tariff scheme that established our new Value-Added for Distribution (VAD) for the following five-year period. For more information, see “Item 5—Operating and Financial Review and Prospects—Integral Tariff Revision”. On January 31, 2018, the ENRE issued Resolution No. 33/18 approving the new distribution cost for Edenor applicable as from February 1, 2018 and the new tariff scheme applicable to Edenor. On July 31, 2018, the ENRE issued Resolution No. 208/18, pursuant to which it approved, the CPD for January 2018 through June 2018 of which 7.93% was applied as of August 1, 2018, and 6.51% in six consecutive monthly installments as of February 1, 2019. The CPD amounted to 15.85%. For more information on tariffs, see “Item 5. Operating and Financial Review and Prospects—Operating Results—Tariffs.”

However, if we are not able to recover all future cost increases and have them reflected in our tariffs, and/or if there is a significant lag of time between when we incur the incremental costs and when we receive increased income we may be unable to comply with our financial obligations, we may suffer liquidity shortfalls and we may need to restructure our debt to ease our financial condition, any of which, individually or in the aggregate, could have a material adverse effect on our business and results of operations and may cause the value of our ADSs and Class B common shares to decline.

Our distribution tariffs may be subject to challenges by Argentine consumer and other groups

In the recent years, our tariffs have been challenged by Argentine consumer associations, such as the action brought against us in December 2009, by an Argentine consumer association (Unión de Usuarios y Consumidores) seeking to annul certain retroactive tariff increases, which was ultimately dismissed by the Argentine Supreme Court of Justice on October 1, 2013.

In May 2016, we were notified by several courts of the Province of Buenos Aires of certain injunctions granted to individual and collective users against Resolution No. 6/16 and Resolution No. 1/16 issued by the ENRE (which authorized our new tariff schedule as from February 2016). Consequently, the then applicable tariff schedule, which included the WEM prices established by Resolution No. 6/16, were not applied during certain periods in 2016 (i) to the entire concession area as a result of the injunctions issued in the “Abarca” case and (ii) to the districts of “Pilar” and “La Matanza”, where injunctions remained in effect until October 24 and November 11, 2016, respectively, when they expired. Therefore, as of those dates, tariff increases have been applied to all users.If any future legal challenge were successful and prevented us from implementing any tariff adjustments granted by the Argentine Government, we could face a decline in collections from our users, and a decline in our results of operations, which could have a material adverse effect in our financial condition and the market value of our ADSs and Class B common shares.

We have been, and may continue to be, subject to fines and penalties that could have a material adverse effect on our financial condition and results of operations

We operate in a highly regulated environment and have been, and in the future may continue to be, subject to significant fines and penalties imposed by regulatory authorities, including for reasons outside our control, such as service disruptions attributable to problems at generation facilities or in the transmission network that result in a lack of electricity supply. Since 2001, the amount of fines and penalties imposed on our Company has increased significantly. As of December 31, 2019, 2018 and 2017, our accrued fines and penalties totaled Ps.7,319, Ps.10,661 million and Ps.9,477 million, respectively (taking into account adjustments made to fines and penalties following the ratification of the Adjustment Agreement and recent regulation). See “Item 4. Information on the Company—Our Business Overview—Fines and Penalties.”

On October 19, 2016, pursuant to Note No. 123,091 the ENRE established the average rate values (Ps./KWh) to be applied as from December 2012, for calculating the penalties payable to the Argentine Government. In accordance with the terms of the Concession Agreement, such values should correspond to the average sale price of energy charged to users. Since the amounts set forth in the note were not consistent with the principle contained in our Concession Agreement, on November 1, 2016, the Company submitted a claim to the ENRE requesting that the amounts in Note No. 123,091 be modified to reflect the amounts contained in the Concession Agreement. As of the date of this annual report, we have received the response from the ENRE (Note No. 129,061), which clarified that the increases or adjustments are not applicable, and only the values paid by the users should be considered.

On February 1, 2017, the ENRE issued Resolution No. 63/17, through which it approved new parameters related to the quality standards, with the purpose of achieving an acceptable quality level by the end of the 2017-2021 period. In this regard, the ENRE established a penalty regime to be applied in the event of non-compliance with the requisite quality rates.

On March 29, 2017, through Note No. 125,248 the ENRE established a new methodology for the calculation of fines and penalties, determining that they must be valued according to the KWh values in effect as of the first day of the six-month period during which the event giving rise to the penalty occurred or the KWh values in effect as of the date of the occurrence of the event in the case of penalties arising from specific events.

In addition, fines and penalties, accrued and not imposed during the transition period of the Adjustment Agreement must be updated using the CPI that the Central Bank uses to elaborate the Multilateral Real Exchange Rate Index (“TCRM”). Fines and penalties accrued and imposed since the date of issuance of the Note No. 120,151 through the completion of the RTI on February 1, 2017 (i.e., the period between April 2016 and February 2017) must also be updated using the CPI.

We cannot assure you that we will not incur significant fines in the future, which could have a material adverse effect on our financial condition, our results of operations and the market value of our ADSs and Class B common shares.

If we are unable to control our energy losses, our results of operations could be adversely affected

Our concession does not allow us to pass through to our users the cost of additional energy purchased to cover any energy losses that exceed the loss factor contemplated by our concession, which is, on average, 10%. As a result, if we experience energy losses in excess of those contemplated by our concession, we may record lower operating profits than we anticipate. Prior to the 2001 and 2002 economic crisis in Argentina, we were able to reduce the high level of energy losses experienced at the time of the privatization down to the levels contemplated (and reimbursed) under our concession. However, during the last years, our level of energy losses, particularly our non-technical losses, started to grow again, in part as a result of the increase in poverty levels and, in turn, in the number of delinquent accounts and fraud. Although we continue to make investments to reduce energy losses, these losses continue to exceed the average 10% loss factor contemplated by the concession and, based on the current tariff schedule and the economic turmoil, we do not expect these losses to decrease in the near term. Our energy losses amounted to 19.9% in 2019, 18.2% in 2018 and17.1% in 2017. We cannot assure you that our energy losses will not continue to increase in future periods, which may lead to lower margins and could adversely affect our financial condition, our results of operations and the market value of our Class B common shares and ADSs.

The Argentine Government could foreclose on its pledge over our Class A common shares under certain circumstances, which could have a material adverse effect on our business and financial condition

Pursuant to our Concession Agreement and the provisions of the Adjustment Agreement, the Argentine Government has the right to foreclose on its pledge over our Class A common shares and sell these shares to a third party buyer if:

·	the fines and penalties incurred in any given year exceed 20% of our gross energy sales, net of taxes, which corresponds to our energy sales;
·	we repeatedly and materially breach the terms of our concession and do not remedy these breaches upon the request of the ENRE;

·	our controlling shareholder creates any lien or encumbrance over our Class A common shares (other than the existing pledge in favor of the Argentine Government);
·	we or our controlling shareholder obstructs the sale of Class A common shares at the end of any management period under our concession;
·	our controlling shareholder fails to obtain the ENRE’s approval in connection with the disposition of our Class A common shares;
·	our shareholders amend our articles of incorporation or voting rights in a way that modifies the voting rights of the Class A common shares without the ENRE’s approval; or
·	we, or any existing shareholders or former shareholders of EASA who have brought a claim against the Argentine Government in the ICSID do not desist from such ICSID claims following completion of the RTI and the approval of a new tariff regime.

On February 1, 2017, the ENRE issued Resolution No. 63/17 establishing the new tariff scheme resulting from the completion of the RTI process, for the following five-year period. In accordance with the provisions of the Adjustment Agreement, Electricidad Argentina S.A. (“EASA”) (currently merged into Pampa Energía S.A.) and EDF International S.A. (“EDFI”) withdrew their ICSID claim, and on March 28, 2017, the ICSID acknowledged the discontinuance of the procedure.

In 2019, our fines and penalties remained below 10% of our gross energy sales. See “Item 4. Information on the Company—Our Concession—Fines and Penalties.”

If the Argentine Government were to foreclose on its pledge of our Class A common shares, pending the sale of those shares, the Argentine Government would also have the right to exercise the voting rights associated with such shares. In addition, the potential foreclosure by the Argentine Government on its pledge over our Class A common shares could be deemed to constitute a change of control under the terms of our Senior Notes due 2022. See “—We may not have the ability to raise the funds necessary to finance a change of control offer as required by the Senior Notes due 2022.” If the Argentine Government forecloses on the pledge of our Class A common shares, our results of operations and financial condition could be significantly affected and the market value of our Class B common shares and ADSs could also be affected.

Default by the Argentine Government could lead to termination of our concession, and have a material adverse effect on our business and financial condition

If the Argentine Government breaches its obligations in such a way that we cannot comply with our obligations under our Concession Agreement or in such a way that our service is materially affected, we may request the termination of our concession, after giving the Argentine Government a 90 days’ prior notice, in writing. Upon termination of our concession, all our assets used to provide the electricity distribution service would be transferred to a new state-owned company to be created by the Argentine Government, whose shares would be sold in an international public bidding procedure. The amount obtained in such bidding would be paid to us, net of the payment of any debt owed by us to the Argentine Government, plus an additional compensation established as a percentage of the bidding price, ranging from 10% to 30%, depending on the management period in which the sale occurs. Any such default could have a material adverse effect on our business and financial condition.

We may be unable to import certain equipment to meet the growing demand for electricity, which could lead to a breach of our Concession Agreement and could have a material adverse effect on the operations and financial position

Certain exchange controls established by the Argentine Government and future restrictions on imports that may be adopted in the future could limit or delay our ability to purchase capital goods that are necessary for our operations (including carrying out specific projects). Under our concession, we are obligated to satisfy all of the demand for electricity originated in our concession area, maintaining at all times certain service quality standards that have been established for our concession. If we are not able to purchase significant capital goods to satisfy all of the demand or suffer unexpected delays in the import process, we could face fines and penalties which may, in turn, adversely affect our activity, financial position, results of operations and/or the market value of our ADSs and Class B common shares.For more information on exchange controls, see “—Exchange Controls”.

We employ a largely unionized labor force and could be subject to an organized labor action, including work stoppages that could have a material effect on our business

As of December 31, 2019, approximately 83% of our employees were union members. Although our relations with unions are currently stable and we have had an agreement in place with the two unions representing our employees since 1995, we cannot assure you that we will not experience work disruptions or stoppages in the future, which could have a material adverse effect on our business and revenues. We cannot assure you that we will be able to negotiate salary agreements or labor conditions on the same terms as those currently in effect, or that we will not be subject to strikes or work stoppages before or during the negotiation process. If we are unable to negotiate salary agreements or if we are subject to demonstrations or work stoppages, our results of operations, financial conditions and the market value of our ADSs and Class B common shares could be materially adversely affected.

We could incur material labor liabilities in connection with our outsourcing that could have an adverse effect on our business and results of operations

We outsource a number of activities related to our business to third-party contractors in order to maintain a flexible cost base. As of December 31, 2019, we had approximately 5,588 third-party employees under contract. Although we have very strict policies regarding compliance with labor and social security obligations by contractors, we are not in a position to ensure that contractors will not initiate legal actions to seek indemnification from us based upon a number of judicial rulings issued by labor courts in Argentina which have recognized joint and several liability between the contractor and the entity to which it is supplying services under certain circumstances. We cannot make any assurances that such proceedings will not be brought against us or that the outcome of such proceedings would be favorable to us. If we were to incur material labor liabilities in connection with our outsourcing, such liabilities could have an adverse effect on our financial condition, our results of operations and the market value of our Class B common shares and ADSs.

Our performance is largely dependent on recruiting and retaining key personnel

Our current and future performance and the operation of our business are dependent upon the contributions of our senior management and our skilled team of engineers and other employees. We depend on our ability to attract, train, motivate and retain key management and specialized personnel with the necessary skills and experience. There is no guarantee that we will be successful in retaining and attracting key personnel and the replacement of any key personnel who were to leave could be difficult and time consuming. The loss of the experience and services of key personnel or the inability to recruit suitable replacements and additional staff could have a material adverse effect on our business, financial condition and results of operations.

We are involved in various legal proceedings which could result in unfavorable decisions for us, which could in turn have a material adverse effect on our financial position and results of operations

We are party to a number of legal proceedings, some of which have been pending for several years. We cannot be certain that these claims will be resolved in our favor and responding to the demands of litigation may divert our management’s time and attention and our financial resources and unfavorable decisions may have a material adverse effect on our financial position and results of operations. See “Item 8. Legal Proceedings.”

We may be unable to collect all or a portion of our claim against RDSA or Aseguradores de Cauciones, which could in turn have a material adverse effect on our financial position and results of operations

In connection with the real estate acquired by the Company in November 2015, the subsequent termination of the agreement with Ribera Desarollos S.A. (RDSA) due to RDSA’s default in August 2018 and the legal actions brought by the Company against the seller and the insurance company, on September 30, 2019, the Company entered into a settlement agreement pursuant to which the insurance company will pay to the Company a sole compensation of U.S.$15 million and assign it the insurer’s subrogation right for the amount paid to RDSA. As of December 31, 2019, the Company has collected U.S.$14 million. The remaining balance will be paid in 6 quarterly installments, the first of which was due on April 21, 2020. As of the date of this annual report we have not received payment. Furthermore, the claim filed by the Company with the Arbitral Tribunal of the Buenos Aires Stock Exchange against RDSA in order for the latter to refund the price paid for the undelivered real property was suspended so that the claim could be allowed in RDSA’s insolvency proceeding. Such claim was allowed by the court hearing the case for the sum of Ps.2,125.9 million. Additionally, the Company initiated an ancillary proceeding rejected by the court to allow an additional amount of Ps.895.7 million, which was previously rejected by the court. In the event that such review process is not favorable, this may have a significant adverse effect on our financial position.

In the event of an accident or other event not covered by our insurance, we could face significant losses that could materially adversely affect our business and results of operations

As of December 31, 2019, our physical assets were insured for up to U.S.$1,604.3 million. However, we do not carry insurance coverage for losses caused by our network or business interruption, including for loss of our concession. See “Item 4. Information on the Company—Our Business—Insurance.” Although we believe our insurance coverage is commensurate with standards for the distribution industry, no assurance can be given of the existence or sufficiency of risk coverage for any particular risk or loss. If an accident or other event occurs that is not covered by our current insurance policies, we may experience material losses or have to disburse significant amounts from our own funds, which may have a material adverse effect on our financial condition and results of operations and the market value of our Class B common shares and ADSs.

A substantial number of our assets are not subject to attachment or foreclosure and the enforcement of judgments obtained against us by our shareholders may be substantially limited

A substantial number of our assets are essential to the public service we provide. Under Argentine law, as interpreted by the Argentine courts, assets which are essential to the provision of a public service are not subject to attachment or foreclosure, whether as a guarantee for an ongoing legal action or in aid of enforcement of a court judgment. Accordingly, the enforcement of judgments obtained against us by our shareholders may be substantially limited to the extent our shareholders seek to attach those assets to obtain payment on their judgment.

The loss of exclusivity to distribute electricity in our service area may be adversely affected by technological or other changes in the energy distribution industry, which would have a material adverse effect on our business

Although our concession grants us the exclusive right to distribute electric energy within our service area, this exclusivity may be revoked in whole or in part if technological developments would make it possible for the energy distribution industry to evolve from its present condition as a natural monopoly into a competitive business. In no case does the complete or partial revocation of our exclusive distribution rights entitle us to claim or to obtain reimbursement or indemnity. Although, to our knowledge, there are no current projects to introduce new technologies in the medium or long-term which may reasonably modify the composition of the electricity distribution business, we cannot assure you that future developments will not enable competition in our industry that would adversely affect the exclusivity right granted by our concession. Any total or partial loss of our exclusive right to distribute electricity within our service area would likely lead to increased competition and result in lower revenues, which could have a material adverse effect on our financial condition, our results of operations and the market value of our Class B common shares and ADSs.

A potential nationalization or expropriation of 51% of our capital stock, represented by the Class A shares, may limit the capacity of the Class B common shares to participate in the board of directors

As of the date of this annual report, the ANSES owned shares representing 26.8%of our capital stock and jointly appointed five Class B and Class C directors in our last shareholders’ meeting. The remaining directors were appointed by the Class A shares.

If the Argentine Government were to expropriate 51% of our capital stock, represented by our Class A shares, the Argentine Government would be the sole holder of the Class A shares and the ANSES would hold the majority of the Class B shares. Certain strategic transactions require the approval of the holders of the Class A shares. Consequently, the Argentine Government and the ANSES would be able to determine substantially all matters requiring approval by a majority of our shareholders, including the election of a majority of our directors, and would be able to direct our operations.

If the Argentine Government nationalizes or expropriates 51% of our capital stock, represented by our Class A shares, our results of operations and financial condition could be adversely affected and this could cause the market value of our ADSs and Class B common shares to decline.

We may not have the ability to raise the funds necessary to repay our commercial debt with CAMMESA, our major supplier

On May 10, 2019, the Company entered into with the Energy Government Secretariat, on behalf of the Federal Government, the Agreement on the Regularization of Obligations, pursuant to which the parties agreed to end pending reciprocal claims originated during the 2006-2016 transitional period (the “Agreement on the Regularization of Obligations”). Accordingly, pending obligations with the MEM for electrical energy purchases during such period were fully compensated. However, as a result of (i) the enactment of the Productive Reactivation Law (in the framework of the public emergency), (ii) the subsequent instruction to the Company to refrain from applying, as from January 1, 2020, the Electricity Rate Schedules Maintenance Agreement entered into between the Company and the National State on September 19, 2019 (the “Electricity Rate Schedules Maintenance Agreement”) and (iii) the prevailing macroeconomic situation, aggravated by the recent effects of COVID-19 outbreak (See “—Developments relating to the novel coronavirus may have a material adverse impact on our business operations, financial condition or results of operations.”), we may not have the ability to raise the funds necessary to repay our commercial debt with CAMMESA.

All of our outstanding financial indebtedness contains bankruptcy, reorganization proceedings and expropriation events of default, and we may be required to repay all of our outstanding debt upon the occurrence of any such events

As of the date of this annual report, U.S.$132.6 million of our financial debt was represented by our Senior Notes due 2022 (the “Senior Notes due 2022”). Under the indenture for the Senior Notes due 2022, certain expropriation and condemnation events with respect to us may constitute an event of default, which, if declared, could trigger the acceleration of our obligations under the notes and require us to immediately repay all such accelerated debt. In addition, all of our outstanding financial indebtedness contains certain events of default related to bankruptcy and voluntaryconcurso preventivo. If we are not able to comply with certain payment obligations as a result of our current financial situation and if the requirements set forth in the Argentine Bankruptcy Law No. 24,522 are met, any creditor, or even us, could file for our bankruptcy, or we could file for a voluntaryconcurso preventivo. In addition, all of our outstanding financial indebtedness also contains cross-default provisions or cross-acceleration provisions that could cause all of our debt to be accelerated if the debt containing expropriation or bankruptcy and/or reorganization proceeding events of default goes into default or is accelerated. In such a case, we would expect to actively pursue formal waivers from the corresponding financial creditors to avoid such potential situation, but in case those waivers are not timely obtained and immediate repayment is required, we could face short-term liquidity problems, which could adversely affect our results of operations and cause the market value of our ADSs and Class B common shares to decline.

We may not have the ability to raise the funds necessary to finance a change of control offer as required by the Senior Notes due 2022

As of the date of this annual report, U.S.$132.6 million of our financial debt is represented by the Senior Notes due 2022. Under the indenture for the Senior Notes due 2022, if a change of control occurs, we must offer to repurchase any and all such notes that are outstanding at a purchase price equal to 100% of the aggregate principal amount of such notes, plus any accrued and unpaid interest thereon and additional amounts, if any, through the purchase date. We may not have sufficient funds available to us to make the required repurchases of the Senior Notes due 2022 upon a change of control. If we fail to repurchase such notes in circumstances that may constitute an event of default under the indenture, which may in turn trigger cross-default provisions in other of our debt instruments then outstanding, our results of operations could be adversely affected and the market value of our ADSs and Class B common shares could decline.

The New York Stock Exchange and/or the Buenos Aires Stock Exchange may suspend trading and/or delist our ADSs and Class B common shares, upon the occurrence of certain events relating to our financial situation

The New York Stock Exchange (“NYSE”) and/or the Buenos Aires Stock Exchange (“BASE”) may suspend and/or cancel the listing of our ADSs and Class B common shares, respectively, in certain circumstances, including upon the occurrence of certain events relating to our financial situation. For example, the NYSE may decide such suspension or cancellation if our shareholders’ equity becomes negative.

The NYSE may in its sole discretion determine on an individual basis the suitability for continued listing of an issue in the light of all pertinent facts. Some of the factors mentioned in the NYSE Listed Company Manual, which may subject a company to suspension and delisting procedures, include: “unsatisfactory financial conditions and/or operating results”, “inability to meet current debt obligations or to adequately finance operations,” and “any other event or condition which may exist or occur that makes further dealings or listing of the securities on the NYSE inadvisable or unwarranted in the opinion of NYSE.”

The BASE may cancel the listing of our Class B common shares if it determines that our shareholders’ equity and our financial and economic situation do not justify our access to the stock market or if the NYSE cancels the listing of our ADSs.

We cannot assure you that the NYSE and/or the BASE will not commence any suspension or delisting procedures in light of our financial situation, including if our shareholders’ equity becomes negative. A delisting or suspension of trading of our ADSs or Class B common shares by the NYSE and/or the BASE, respectively, could adversely affect our results of operations and financial conditions and cause the market value of our ADSs and Class B common shares to decline.

Changes in weather conditions or the occurrence of severe weather (whether or not caused by climate change or natural disasters), could adversely affect our operations and financial performance.

Weather conditions may influence the demand for electricity, our ability to provide it and the costs of providing it. In particular, severe weather may adversely affect our results of operations by causing significant demand increases, which we may be unable to meet without a significant increase in operating costs. This could strongly impact the continuity of our services and our quality indicators. For example, the exceptional thunderstorms that occurred in April and December of 2013 and a heat wave that occurred in December of 2013 affected the continuity of our services, both in the low voltage and medium voltage networks. See “Item 4. Information on the Company—Business Overview—Quality Standards–Edenor’s Concession”. Furthermore, any such disruptions in the provision of our services could expose us to fines and orders to compensate those users affected by any such power cuts, as has occurred in the past (see “Item 4. Information on the Company—Business Overview—Quality Standards—Fines and Penalties”). Our financial condition, results of operations and cash flows could therefore be negatively affected by changes in weather conditions and severe weather.

Cybersecurity events, such as a cyber-attack could adversely affect our business, financial condition, results of operations and cash flows

We depend on the efficient and uninterrupted operation of internet-based data processing communication and information exchange platforms and networks , including administrative and business related systems (such as Supervisory Control and Data Acquisition (“SCADA”) and DCS Software, Inc. (“DCS”)). Cybersecurity risks have generally increased in recent years as a result of the proliferation of new technologies and the increased sophistication and activities of cyber-attacks. Through part of our grid and other initiatives, we have increasingly connected equipment and systems to the internet. Due to the critical nature of our infrastructure and the increased accessibility enabled through connection to the internet, we may face a heightened risk of cybersecurity incidents such as computer break-ins, phishing, identity theft and other disruptions that could negatively affect the security of information stored in and transmitted through our computer systems and network infrastructure. In the event of a cyber-attack, we could have our business operations disrupted, property damaged and user information stolen; experience substantial loss of revenues, response costs and other financial loss; and be subject to increased regulation, litigation and damage to our reputation. In addition, while we have not experienced any loss related to cybersecurity events, contingency plans in place may not be sufficient to cover liabilities associated with any such events and therefore, applicable insurance coverage may be deemed inadequate, preventing us from receiving full compensation for the losses sustained as a result of such a disruption. Although we intend to continue to implement security technology devices and establish operational procedures (such as, our Disaster Recovery Plan, which aims to respond and recover business’ core applications in the event of serious incidents) to prevent disruption resulting from, and counteract the negative effects of cybersecurity incidents within the next three years, it is possible that not all of our current and future systems are or will be entirely free from vulnerability and these security measures will not be successful. Accordingly, cybersecurity is a material risk for us and a cyber-attack could adversely affect our business, results of operations and financial condition.

Risks relating to our ADSs Class B common shares

Restrictions on the movement of capital out of Argentina may impair the ability of holders of ADSs to receive dividends and distributions on, and the proceeds of any sale of, the Class B common shares underlying the ADSs, which could affect the market value of the ADSs

The Argentine Government has reestablished restrictions on the conversion of Argentine currency into foreign currencies and on the remittance to foreign investors of proceeds from their investments in Argentina. Conversion of dividends, distributions, or the proceeds from any sale of shares from Pesos into U.S. Dollars, as well as the transfer of those funds abroad is strongly limited. See “Item 10. Additional Information—Exchange Controls”. Future restrictions on foreign exchange market access, other than those already imposed, may affect even more the conversion of dividends, distributions, or the proceeds from any sale of shares, as the case may be, from Pesos into U.S. Dollars and the remittance of such U.S. Dollars abroad. Also, certain of our indebtedness includes covenants limiting the payment of dividends. We cannot assure you that the Argentine Government will not take new measures or deepen those already established in the future. The depositary for the ADSs may hold the Pesos it cannot otherwise convert for the account of the ADS holders who have not been paid. Any future adoption by the Argentine Government of constraints on the movement of capital out of Argentina may deepen the restrictions on the ability of our foreign shareholders and holders of ADSs to obtain the full value of their shares and ADSs, and may adversely affect the market value of our Class B common shares and ADSs.

Our shareholders’ ability to receive cash dividends may be limited

According to current regulations, transfer of funds abroad in order to pay dividends does not require Central Bank approval, to the extent such dividend payments are made in compliance with the requirements set forth in article 3.4 of Communication “A” 6844 issued by the Central Bank. (Please see “Item 10 - Additional Information—Exchange Controls”). Our shareholders’ ability to receive cash dividends may be limited by the ability of the depositary to convert cash dividends paid in Pesos into U.S. Dollars. Under the terms of our deposit agreement with the depositary for the ADSs, the depositary will convert any cash dividend or other cash distribution we pay on the common shares underlying the ADSs into U.S. Dollars, if it can do so on a reasonable basis and can transfer the U.S. Dollars to the United States. If this conversion is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. If the exchange rate fluctuates significantly during a time when the depositary cannot convert the foreign currency, shareholders may lose some or all of the value of the dividend distribution. We cannot assure you that your ability to receive dividends, as an ADSs holder, will not be affected due to current or future regulations, and that the Argentine Government will not adopt new measures or deepen those already implemented, which could result in more restrictions on the access to the foreign exchange market.

Under Argentine law, shareholder rights may be fewer or less well-defined than in other jurisdictions

Our corporate affairs are governed by our by-laws and by Argentine corporate law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, such as the States of Delaware or New York, or in other jurisdictions outside Argentina. In addition, the rights of holders of the ADSs or the rights of holders of our Class B common shares under Argentine corporate law to protect their interests relative to actions by our board of directors may be fewer and less well-defined than those under the laws of those other jurisdictions. Although insider trading and price manipulation are illegal under Argentine law, the Argentine securities markets are not as highly regulated or supervised as the U.S. securities markets or markets in some other jurisdictions. In addition, rules and policies against self-dealing and regarding the preservation of shareholder interests may be less well-defined and enforced in Argentina than in the United States, putting holders of our Class B common shares and ADSs at a potential disadvantage.

Holders of ADSs may be unable to exercise voting rights with respect to the Class B common shares underlying the ADSs at our shareholders’ meetings

Shares underlying the ADSs are held by the depositary in the name of the holder of the ADS. As such, we will not treat holders of ADSs as one of our shareholders and, therefore, holders of ADSs will not have shareholder rights. The depositary will be the holder of the Class B common shares underlying the ADSs and holders may exercise voting rights with respect to the Class B common shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs. There are no provisions under Argentine law or under our by-laws that limit the exercise by ADS holders of their voting rights through the depositary with respect to the underlying Class B common shares. However, there are practical limitations on the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with these holders. For example, holders of our Class B common shares will receive notice of shareholders’ meetings through publication of a notice in an official gazette in Argentina, an Argentine newspaper of general circulation and the daily bulletin of the BASE, and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. ADS holders, by comparison, do not receive notice directly from us. Instead, in accordance with the deposit agreement, we provide the notice to the depositary. If we ask it to do so, the depositary will mail to holders of ADSs the notice of the meeting and a statement as to the manner in which instructions may be given by holders. To exercise their voting rights, ADS holders must then instruct the depositary as to voting the Class B common shares represented by their ADSs. Due to these procedural steps involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of Class B common shares and Class B common shares represented by ADSs may not be voted as the holders of ADSs desire. Class B common shares represented by ADSs for which the depositary fails to receive timely voting instructions may, if requested by us, be voted at the corresponding meeting either in favor of the proposal of the board of directors or, in the absence of such a proposal, in accordance with the majority.

Our shareholders may be subject to liability for certain votes of their securities

Because we are a limited liability corporation, our shareholders are not liable for our obligations. Shareholders are generally liable only for the payment of the shares they subscribe. However, shareholders who have a conflict of interest with us and who do not abstain from voting at the respective shareholders’ meeting may be liable for damages to us, but only if the transaction would not have been approved without such shareholders’ votes. Furthermore, shareholders who willfully or negligently vote in favor of a resolution that is subsequently declared void by a court as contrary to the law or our by-laws may be held jointly and severally liable for damages to us or to other third parties, including other shareholders.

Provisions of Argentine securities laws could deter takeover attempts and have an adverse impact on the price of our shares and ADSs

Argentine securities laws contain provisions that may discourage, delay or make more difficult a change in control of our Company, such as the requirement, upon the acquisition of a certain percentage of our capital stock, to launch a tender offer to acquire a certain percentage of our capital stock, which percentage ranges from 10% to 100% depending on several factors. These provisions may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interest of our shareholders and may adversely affect the market value of our shares and ADSs.

Item 4. Information on the Company

Recent Developments in Argentina – Measures Designed to Address the COVID-19 Outbreak

In late December 2019, a notice of a pneumonia originating from Wuhan, Hubei province (COVID-19, caused by a novel coronavirus) was reported to the World Health Organization, with cases soon confirmed in multiple provinces in China, as well as in other countries. On March 11, 2020, the World Health Organization characterized the COVID-19 as a pandemic. Several measures have been undertaken by governments of the countries where the coronavirus has affected broad swathes of the population, such as the countries of the European Union, the United Kingdom, the United States of America, South Korea and Japan, among others, to control the coronavirus, including mandatory quarantines, travel restrictions to and from the above listed countries by air carriers and foreign governments. As of April 23, 2020, Argentina identified 3,435 confirmed cases of coronavirus, of which 165 were fatal. To date, Argentina has adopted several measures in response to the COVID-19 outbreak in the country aimed at preventing mass contagion of Argentine residents and the overcrowding of the Argentine health service, which include:

·	February 26—March 12, 2020: screening of passengers at airports; mandatory isolation for 14 days of persons with suspected or confirmed cases of COVID-19, persons in close contact with suspected or confirmed cases of COVID-19 and persons arriving or recently arrived from affected zones; closure of activities with large crowds; prohibition of audience attendance to sport events;
·	March 13—March 15, 2020: stricter surveillance of Argentine borders; suspension of flights by various airlines and adoption of regulations to coordinate repatriation flights for Argentine residents abroad; prohibition to access national parks and protected areas; schools and universities shutdown (which remain open for food aid and administrative purposes);
·	March 16—March 18, 2020: closure of Argentine borders; suspension of domestic flights and long-distance trains and buses operations; suspension of the national soccer league; temporary work leaves for pregnant women, people older than 60 years and other persons considered at special risk upon infection; authorization for federal public employees to work remotely (except for employees providing essential services); promotion of home office policies in the private sector and beginning of construction of eight modular hospitals;
·	March 19, 2020: imposition of a nation-wide mandatory lockdown, where exceptionally essential transit is permitted; deployment of security forces for lockdown enforcement;
·	March 20—April 13, 2020: assistance to Argentine residents abroad; extension of nation-wide lockdown until May 10, 2020.

Simultaneously, the Argentine Government has announced and is implementing a several stimulus measures to limit the effects of the COVID-19 outbreak on the economy, including the following:

·	a one-time Ps.3,100 cash payment to recipients of the universal child allowance;

·	a one-time Ps.3,000 cash payment to retirees receiving minimum benefits (currently Ps.15,892) and those that receive above the minimum but less than Ps.18,892, which covers approximately 4.6 million retirees;
·	a one-time Ps.10,000 cash payment which will be granted to approximately 7,785,000 to unemployed persons and persons employed informally, among other socially vulnerable persons;
·	a capital spending program on infrastructure, education and tourism for approximately Ps.100 billion;
·	a payment exemption of employers’ contributions for companies in vulnerable industries, and an increase of unemployment insurance and salaries subsidies;
·	subsidized loans to small- and medium-sized companies via the financial system of approximately Ps.30 billion for working capital;
·	a 40% increase in the budget allocation for capital expenditures, mainly in road infrastructure, housing and school construction; and
·	a financial assistance program for the provinces for an amount up to Ps. 120 billion (Programa Para la Emergencia Financiera Provincial) created to provide financial relief to the provinces.

Other measures adopted by the Argentine Government to mitigate the effects of the COVID-19 outbreak in the economy include the following:

·	a 180-day period where the suspension of the following services is not permitted upon the beneficiary’s failure to pay less than three consecutive invoices from March 1, 2020: electric energy, natural gas through pipeline, running water, fixed telephony, mobile telephony, Internet and cable television services. This measure is only applicable to certain users identified in the decree adopting it.Specifically, regarding electric energy, users that have prepaid systems, shall be provided with the service even if they fail to make the corresponding recharges; additionally, through Resolution No.173/2020, in force as of April 18, 2020, the Ministry of Productive Development sets forth that electricity distribution services, among others, shall be payable in 30 monthly, equal and consecutive installments, the first one being due on September 30, 2020 (notwithstanding the possibility for customers to pay invoices before or through a less number of installments). This resolution is of limited application to a specific group of clients detailed in the resolution. Furthermore, the financing can also be applied to the purchase of energy that the Company makes to the MEM associated to these consumptions.
·	the suspension of certain penalties and disqualifications applicable to checking accounts with insufficient funds until April 30, 2020;
·	deferral of principal or interest payments in respect of any financing (excluding credit cards) given by local financial entities, due between April 1, 2020, and June 30, 2020;
·	the prices freezes as of March 6, 2020, for certain essential goods such as food, personal care, medicines and medical products for a 30-day period;
·	lease prices freeze and evictions suspension until September 30, 2020;
·	prohibition to dismiss employees without cause and dismiss and suspend employees due to work slowdown or force majeure for a 60-day period beginning March 31, 2020.

Specifically, regarding corporate matters, the Public Registry of Commerce (Inspección General de Justicia, the “IGJ”) issued Resolution No. 11/2020 by means of which, subject to the compliance of certain conditions, companies are authorized to carry out board meetings and shareholders meetings through digital or electronic means or platforms during the mandatory isolation period. Consistently, theCNV issued Resolution No. 830/2020 which establishes that companies that are under CNV’s control are authorized to hold long distance shareholders’ and board of directors’ meetings during the mandatory isolation.

History and Development of the Company

Empresa Distribuidora y Comercializadora Norte S.A.(Distribution and Marketing Company of the North S.A.), or Edenor, is a public service company incorporated as asociedad anónima (stock corporation) under the laws of Argentina. Our principal executive offices are located at Avenida del Libertador 6363, 4° floor, City of Buenos Aires, C1428ARG, Argentina, and our general telephone number at this location is +54 11 4346 5000.

We were incorporated on July 21, 1992, under the name Empresa Distribuidora Norte Sociedad Anónima, as part of the privatization of the Argentine state‑owned electricity utility, Servicios Eléctricos del Gran Buenos Aires S.A. (SEGBA). The Company’s term of duration is 95 years. In anticipation of its privatization, SEGBA was divided into three electricity distribution companies, including our company, and four electricity generation companies, and on May 14, 1992, the Argentine Ministry of Economy and Public Works and Utilities approved the public sale of all of our company’s Class A common shares, representing 51% of the capital stock of our company.

A group of international investors, which included EDF International S.A. (a wholly owned subsidiary of Électricité de France S.A.), presented a bid for our Class A common shares through Electricidad Argentina S.A. (“EASA”), an Argentine company. EASA was awarded the bid and, in August 1992, EASA and the Argentine Government entered into a stock purchase agreement relating to the purchase of our Class A common shares. In addition, on August 5, 1992, the Argentine Government granted us a concession to distribute electricity on an exclusive basis within our concession area for a period of 95 years (the “Concession Agreement”). On September 1, 1992, EASA acquired our Class A common shares and became our controlling shareholder. See “Item 7. Major Shareholders and Related Party Transactions - Acquisition by Central Térmica Loma de la Lata S.A”.

In June 1996, our shareholders approved the change of our name to Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR S.A.) to more accurately reflect the description of our core business. The amendment to our by–laws related to our name change was approved by the ENRE and registered with the IGJ in 1997.

In 2001, EDFI acquired, in a series of transactions, all of the shares of EASA held by EASA’s other shareholders, ENDESA Internacional, YPF S.A. and SAUR. As a result, EASA became a wholly–owned subsidiary of EDFI. In addition, EDFI purchased all of our Class B common shares held by these shareholders, increasing its direct and indirect interest in us to 90%.

On January 6, 2002, the Argentine Congress enacted the Public Emergency Law, which authorized the Argentine Government to implement certain measures to overcome the country’s economic crisis. Under the Public Emergency Law, the Argentine Government altered the terms of our concession and the concessions of other public utility services by renegotiating tariffs, freezing distribution margins and revoking price adjustment mechanisms, among other measures.

In September 2005, Dolphin Energía S.A. (“Dolphin Energía”) and IEASA acquired an indirect controlling stake in our company from EDFI. Dolphin Energía and IEASA were at the time of such acquisition controlled by the principals of Grupo Dolphin, an Argentine advisory and consulting firm that carries out private equity activities. On September 28, 2007, Pampa Energía S.A. (“Pampa Energía”, “PESA” or “Pampa”) acquired all the outstanding capital stock of Dolphin Energía and IEASA from the then current shareholders of these companies, inexchange for common stock of Pampa Energía. As a result of several acquisitions made by Pampa since 2006, it is currently the largest independent energy integrated company in Argentina and, directly and/or through its subsidiaries and joint controlled companies, Pampa participates in the electricity and gas value chains.

In April 2007, we completed the initial public offering of our Class B common shares, in the form of shares and American depositary shares, or ADSs. We and certain of our shareholders sold 18,050,097 ADSs, representing 361,001,940 Class B common shares, in an offering in the United States and elsewhere outside Argentina, and our Employee Stock Participation Program sold 81,208,416 Class B common shares in a concurrent offering in Argentina. Our ADSs are listed in the NYSE under the symbol “EDN,” and our Class B common shares are listed on the Buenos Aires Stock Exchange (“BASE”) under the same symbol. We received approximately U.S.$61.4 million in proceeds from the initial public offering, before expenses, which we used to repurchase a part of our then outstanding debt. Following the initial public offering, Pampa continues to hold 51.79% of our common shares, and approximately 15.14% are held by the public. See “Item 7. Major Shareholders and Related Party Transactions”.

On November 20, 2008, the Argentine Congress passed a law unifying the Argentine pension and retirement system into a system publicly administered by the ANSES and eliminating the retirement savings system previously administered by private pension funds under the supervision of a Governmental agency. In accordance with this law, private pension funds transferred all of the assets administered by them under the retirement savings system to the ANSES. As of the date of this annual report, ANSES held 242,999,553 of our Class B common shares, representing 26.81% of our capital stock.

Parent Company Merger Process

The merger by absorption between Central Térmica Loma de la Lata S.A. (“CTLL”), as merging and surviving company, and EASA, or parent company, and IEASA S.A. (“IEASA”) - EASA’s majority shareholder – as the merged/absorbed companies, began in March 2017. On January 19, 2018, CTLL’s shareholders approved the merger and CTLL’s board of directors became responsible for the management of EASA and IEASA, in accordance with the provisions of Section 84 of the Argentine Corporations Law.

On September 22, 2017, PESA’s board of directors approved the merger of Bodega Loma la Lata S.A. (“BLL”), Central Térmica Güemes S.A (“CTG”), CTLL (the acquiring company of EASA), Eg3 Red S.A. (“EG3 Red”), Inversora Diamante S.A. (“INDISA”), Inversora Nihuiles S.A (“INNISA”), Inversora Piedra Buena S.A. (“IPB”), Pampa Participaciones II S.A (“PPII”), Transelec, and Petrolera Pampa S.A. (“PEPASA”), as the acquired or absorbed companies, into PESA, as the acquiring or absorbing company, under the terms of tax neutrality (tax-free reorganization) pursuant to Section 77 and following sections of the Income Tax Law. The effective date of the merger was established as October 1, 2017, as from which date the transfer to the acquiring company of the totality of the acquired companies’ equity took effect, with all the latter’s rights and obligations, assets and liabilities were incorporated into the acquiring company’s equity; subject to the corporate approvals required under the applicable regulations and the registration with the Public Registry of Commerce of both the merger and the dissolution without liquidation of the acquired companies.

On August 24, 2018, the Company was notified of the registration by the IGJ of: (i) the merger of EASA (the parent company of Edenor) and IEASA (the parent company of EASA), with and into CTLL, as the absorbing and surviving company of both; and (ii) the merger with and into Pampa, as the absorbing and surviving company, of CTLL, BLL, CTG, Eg3 Red, INNISA, INDISA, IPB, PPII and PEPASA, as the absorbed companies. As a result thereof, Pampa became the direct controlling company of Edenor.

Business Overview

We believe we are the largest electricity distribution company in Argentina and one of the largest in Latin America in terms of number of users and electricity sold (both in GWh and in Pesos) in 2019. We hold a concession to distribute electricity on an exclusive basis to the northwestern part of the greater Buenos Aires metropolitan area and in the northern part of the City of Buenos Aires, comprising an area of 4,637 square kilometers and a population of approximately 9 million people. As of December 31, 2019, Edenor served 3.1 million users. The following table shows the percentage of the electricity produced and sold by generating companies that was purchased by us in the periods indicated:

Year	Electricity demand⁽¹⁾	Edenor demand⁽²⁾	Edenor´s demand as % of total demand
2017	132,426	25,950	19.6%
2018	132,925	25,906	19.5%
2019	128,880	24,960	19.4%

Source:CAMMESA

⁽¹⁾ Demand in the Mercado Eléctrico Mayorista Sistema Patagónico (Patagonia wholesale electricity market, or MEMSP).

⁽²⁾ Calculated as electricity purchased by us and our wheeling system users.

Edenor Concession

Edenor’s concession is currently set to expire on August 31, 2087, for a term of 95 years, and may be extended for one additional 10-year period if Edenor requests the extension at least 18 months before expiration. The term of the concession is divided into management periods: a first period of 15 years and subsequent periods of ten years each. At the end of each management period, the Class “A” shares representing 51% of the share capital of Edenor, currently held by Pampa, must be offered for sale through a public bidding. If Pampa makes the highest bid, it will continue to hold the Class “A” shares, and no further disbursements will be necessary. On the contrary, if Pampa is not the highest bidder, then the bidder who makes the highest bid shall pay Pampa the amount of the bid in accordance with the conditions of the public bidding. The proceeds from the sale of the Class “A” shares will be delivered to Pampa after deducting any amounts receivable to which the grantor of the concession may be entitled. The first management period commenced on February 1, 2017 and is estimated to end on March 1, 2022.

The Company has the exclusive right to render electric power distribution and sales services within the concession area to all the users who are not authorized to obtain their power supply from the WEM, thus being obliged to supply all the electric power that may be required in a timely manner and in accordance with the established quality levels. In addition, the Company must allow free access to its facilities to any WEM agents whenever required, under the terms of the Concession.

No specific fee must be paid by the Company under the Concession Agreement during the term of the concession.

On January 6, 2002, the Argentine Government enacted Law No. 25,561 pursuant to which U.S. Dollar adjustment clauses, as well as any other indexation mechanism stipulated in the contracts entered into by the Argentine Government, including those related to public utilities, were declared null and void as from such date. The applicable prices and rates were converted into Argentine Pesos at a rate of Ps.1 to U.S.$1.

The Company is subject to the terms of its Concession Agreement and the provisions of the regulatory framework comprised Laws No. 14,772, 15,336 and 24,065, resolutions and regulatory and supplementary standards issued by certain authorities. Thus, the Company is responsible for the distribution and sale of electricity as a public service with a satisfactory quality level pursuant to the requirements set forth in the aforementioned Concession Agreement and regulatory framework.

Failure to comply with the established guidelines may result in the application of fines, based on the economic damage suffered by the user at the time service was provided in an unsatisfactory manner, which will be determined in accordance with the methodology stipulated in the Concession Agreement. The ENRE is the regulatory authority responsible for enforcing the pre-established guidelines.

Geographic Exclusivity

Our concession gives us the exclusive right to distribute electricity within our concession area during the term of our concession. Under our concession, neither the national nor the provincial or local Governments may grant further concessions to operate electricity distribution services within our concession area. In that respect, we are obligated to satisfy all of the demand for electricity originated in our concession area, maintaining at all times a service quality standard that has been established in our Concession Agreement. This geographic exclusivity may be terminated in whole or in part by the Argentine Government if technological changes make it possible for the energy distribution industry to evolve from its present condition as a natural monopoly into a competitive business. However, the Argentine or the Provincial Government may only exercise its right to alter or terminate our geographical exclusivity at the end of each management period under our concession, by prior written notice at least six months before the expiration of the corresponding management period.

The electricity distribution and sale service is provided exclusively to all the users connected to the network within the area comprised the following:

Region I: City of Buenos Aires, the area encompassing Dock "D", “unnamed street”, path of the Autopista Costera (coastline highway), extension of Pueyrredón Ave., Córdoba Ave., Ferrocarril San Martín railway tracks, General San Martín Ave., Zamudio, Tinogasta, General Paz Ave. and Río de La Plata river, and Province of Buenos Aires, the districts of San Martín, Tres de Febrero, San Isidro and Vicente López.

Region II: Province of Buenos Aires, the districts of Morón, Ituzaingó, Hurlingham, Merlo, Marcos Paz, Las Heras and La Matanza.

Region III: Province of Buenos Aires, the districts of San Fernando, Tigre, Escobar, Malvinas Argentinas, San Miguel, José C. Paz, Pilar, Moreno and General Rodríguez.

Our Obligations

We are obligated to supply electricity upon request by the owner or occupant of any property in our concession area. We are entitled to charge for the electricity supplied at rates that are established by tariffs set with the prior approval of the ENRE under applicable regulations. Pursuant to our concession, we must also meet specified service quality standards relating to:

·	the time required to connect new users;
·	voltage fluctuations;
·	interruptions or reductions in service; and
·	the supply of electricity for public lighting and to certain municipalities.

Our concession requires us to make the necessary investments to establish and maintain the quality of service standards and to comply with the stringent minimum public safety standards as specified in our concession. We are also required to furnish the ENRE with all information requested by it and must obtain the ENRE’s prior consent for the disposition of assets that are assigned to the provision of our electricity distribution services. The ENRE also requires us to compile and submit various types of reports regarding the quality of our service and other technical and commercial data, which we must periodically report to the ENRE.

On February 28, 2019, the Argentine Government, the Province of Buenos Aires and the City of Buenos Aires entered into an agreement for the transfer of the public service of electricity distribution, duly awarded under the Concession Agreement by the Argentine Government to Edenor, from the jurisdiction of the Argentine Government to the Province of Buenos Aires and the City of Buenos Aires.

In the framework of such agreement, on May 9, 2019, the Federal Government, the City of Buenos Aires and the Province of Buenos Aires entered into the Agreement on the Implementation of the Transfer of Jurisdiction (the “Transfer Agreement”), which became effective on October 2, 2019, after obtaining the approval of the legislature of the City of Buenos Aires and the Provincial Executive Branch, pursuant to which the City of Buenos Aires and the Province of Buenos Aires jointly assumed, as from the date of effectiveness, the regulation, control and the capacity as grantors over the distribution service granted to Edenor under the Concession Agreement. Furthermore, it is provided that (i) the Concession Agreement and also the national regulations issued by both the Energy Secretariat and the ENRE will remain in full force and effect until the effective date of the transfer occurs pursuant to the applicable regulatory framework; and (ii) that the pledge of the Class “A” shares, duly pledged as collateral to secure the performance of the obligations assumed by the holder of the concession and/or the majority shareholders under the Concession Agreement, is assigned on an undivided basis by the Federal Government to the City of Buenos Aires and the Province of Buenos Aires.

The Company was notified of and assented to the arrangement made by the Federal Government and the new grantors of the concession with respect to the Transfer Agreement and undertook both to indemnify them against any claims and to obtain the agreement of the majority of its shareholders. The Transfer Agreement was ratified by the Provincial Executive Power and the City of Buenos Aires’ Legislative Power.

Furthermore, in the context of the change of jurisdiction and as a condition for the transfer, on May 10, 2019, the Company and the EnergyGovernment Secretariat, on behalf of the Federal Government, entered into the Agreement on the Regularization of Obligations, putting an end to the mutual pending claims originated in the 2006-2016 Transitional Tariff Period.

We are obligated to allow certain third parties (namely, other agents and large users) to access any available transportation capacity within our distribution system upon payment of a wheeling fee. Consequently, we must render the distribution service on an uninterrupted basis to satisfy any reasonable demand. We are prohibited from engaging in practices that limit competition or result in monopolistic abuses.

Under our concession, we may also be required to continue rendering services after the termination of the Concession Agreement term upon the request of the Argentine Government, but for a period not to exceed 12 months.

In addition, Clause 22.1 of the Adjustment Agreement required us, our shareholders and former shareholders to suspend all claims and legal proceedings (including arbitration actions) in administrative, state or federal courts located in Argentina or abroad, that were related to measures adopted with respect to the Concession Agreement, derived from the emergency situation declared by the Public Emergency Law. After the completion of the RTI, we and our shareholders and former shareholders were also obligated to completely waive and desist from all of the above-mentioned claims and legal proceedings. All proceedings related to circumstances supervening the above described situations, or that were not related to the consequences of the Public Emergency Law, were expressly excluded. If our shareholders or former shareholders had not desisted from these claims, the Argentine Government would have the right to foreclose on the pledge of our Class A common shares and sell these shares to a third-party buyer. If the Company or any shareholder or former shareholder re-established or initiated a new claim, we would have the obligation to hold the Argentine Government harmless in respect of amounts it could be required to pay pursuant to such claims. EDFI and Pampa suspended all such claims against the Argentine Government as part of the Adjustment Agreement and, in connection with its sale of its controlling stake in Edenor, EDFI agreed to withdraw its claims against the Argentine Government before the ICSID at the request of Dolphin Energía.

On February 1, 2017, the ENRE issued Resolution No. 63/17 which established the new tariff scheme as a result of the completion of the RTI process, which will apply to the following five-year period. Pursuant to the provisions of the Adjustment Agreement, Pampa (See “Item 7. Major Shareholders and Related Party Transactions—Parent Company Merger Process”)and EDFI withdrew their ICSID claim, and on March 28, 2017, the ICSID acknowledged the discontinuance of the proceedings.

In accordance with our concession, our controlling shareholder, Pampa, has pledged its 51% stake in the Company to the Argentine Government to secure obligations under our concession. The Adjustment Agreement required that the pledge be extended to secure our obligations under such agreement. The Argentine Government may foreclose on its pledge over the Class A shares and sell them in a public bidding process if certain situations occur. See “Item 4. Information on the Company—Business Overview—Foreclosure on the Pledge of Our Class A common shares or Revocation of Our Concession”.

Quality Standards

Service quality

Pursuant to our concession, we are required to meet certain levels of technical quality of the product delivered (voltage level and waveform) and the service provided (frequency and duration of interruptions). With the adoption of the new Sub-Annex IV which has been in force since March 2017 and the start of the RTI’s five-year period (2017-2021) (the “RTI Five-Year Period”), the admissible disruptions gaps in the voltage level may not exceed the following percentages:

High voltage	‑5.0% to +5.0%
Overhead network (medium or low voltage)	‑8.0% to +8.0%
Buried network (medium or low voltage)	‑8.0% to +8.0%
Rural	‑8.0% to +8.0%

The concession granted to Edenor stipulates that fines will be applied when registered stress sets exceed the preceding limits for more than 3% of the total measurement time (5% for the case of measurements of perturbations to the waveform). The penalty rate for each kWh delivered in poor conditions depends on the magnitude of the setback with respect to the rated voltage and follows a quality path that increases that rate over the RTI Five-Year Period. For the particular case of voltage set-offs in selected points, regulation provides for an increase in the bonuses to be credited by the customer in case the set-off outside the tension limits persists over time. Fines are credited to the invoice of the affected user.

The technical service quality levels set out in Edenor’s concession refer to the frequency and duration of interruptions. It will be sufficient for one of the limits to be exceeded for the penalized time of said interruption and the rest computable interruptions to be included in the calculation of the bonuses. During the RTI Five-Year Period, the quality requirement is also increased by the percentage of the cost of unsupplied energy corresponding to the customer's tariff based on the semester of the five-year period and the penalized duration of the interruption. In the event of an extraordinary impact on the provision of the service (i.e., 70,000 or more affected customers for five or more days in a row) special compensation is provided for the T1R customers affected during those periods for more than the time limit for the corresponding semester of the five-year period.

Additionally, through Resolution No. 198/2018, the ENRE established additional penalties of 300 or 600 kWh per user depending on the Feeder Six-Month Track Factor (Factor de Sendero Semestral del Alimentador or “FSSA”) and the Consumer Six-Month Track Factor (Factor de Sendero Semestral de Usuario or “FSSU”) as from the fourth six-month period of the RTI Five-Year Period, which commenced in September 2018. The penalties that may eventually be applied must be calculated and reported to the ENRE within 120 calendar days from the end of the six-month control period and deposited in an escrow account.

The following table indicates the stipulated levels for the frequency and duration of interruptions per customer during the first semester of the RTI Five-Year Period:

Category of user	Frequency of interruptions (maximum number of interruptions per six month period)	Duration of interruption (maximum amount of time per interruption)⁽¹⁾
High voltage	6	4 hours
Medium voltage	8	6 hours
Low voltage: (small and medium demand)	12	20 hours
Large demand	12	12 hours

_______________________

⁽¹⁾Interruptions of less than three minutes are not recorded.

The values for the final semester of theRTI Five-Year Period are as follows:

User category	Frequency of interruptions (maximum number of interruptions per semester)	Interrupt duration (maximum amount of Time per interruption)⁽¹⁾
High Voltage	3	2 hours
Medium Voltage	4	3 hours
Low Voltage: (Small and Medium Demands)	6	10 hours
Big Demands	6	6 hours

(1) Interruptions of less than or equal to three minutes are not recorded

The convergence of the permissible frequency and time limits between the initial semester and the final semester of theRTI Five-Year Period follows the quality path set out in the new Sub-Annex IV of the concession (pursuant to ENRE Resolution No. 63/2017 and amendments).

The regulation for theRTI Five-Year Period also sets quality levels for SAIFI/SAIDI indicators per district/commune (City of Buenos Area). These limits also vary across the aforementioned quality path. The setting-off of these limits, results, approximately, in a semi-annual factor per district or commune that increases or decreases the individual bonuses of customers belonging to the same district or commune.

Interruptions of less than or equal to three minutes and those attributable to force majeure events are not counted against individual time or frequency limits. The regulation for theRTI Five-Year Period also provides that interruptions linked to Medium Voltage/Low Voltage (“MV” and “/LV”, respectively) service improvement works or particular weather events affecting between 100,000 and 400,000 users in 24 hours may be excluded from the calculation of individual bonuses. However, such interruptions cannot be excluded from the calculation of SAIFI/SAIDI indicators per district/commune (City of Buenos Aires).

It is also envisaged that during theRTI Five-Year Period both the cost of unsupplied energy (quality of service) and the cost of energy delivered in poor conditions (product quality) will be updated each time changes in the Value-Added for Distribution (VAD) occur, taking into account the adjustments granted and earned accumulated as of the first day of the corresponding control period. During each control period, the two energy cost values determined above will remain constant.

The following table sets forth the average of frequency and duration (SAIDI and SAIFI) of interruptions to our service in the periods indicated:

	Year ended December 31,
Per customers	2019	2018	2017	2016
Average frequency of interruptions (times)	6.15	6.94	9.02	8.67
Average duration of interruption (hours)	15.94	22.65	27.55	25.84

In addition, to meet required quality levels, we must comply with certain operational requirements related to the quality of our commercial services, safety in public streets, data gathering and processing (including through reports that must be submitted to ENRE for supervision and control) and other contractual requirements related to our environmental management plan and the claims filed with ENRE by users which have been resolved after the established period.

Product quality

As of December 31, 2019, product quality regulations that established a quality track for the RTI Five-Year Period remain effective, and establish voltage deviation limits for MV and LV supplies at a unified value of 8%, 5% exclusively for High Voltage (“HV”), and the cost of energy delivered in bad conditions at incremental values throughout the track for both voltage levels and disturbances.

Fines and Penalties

Under the terms of our concession, the ENRE may impose fines and penalties if we fail to comply with our obligations.

Fines relating to our failure to meet any of the quality and delivery standards described above are payable by granting credits or bonuses to our users to offset a portion of their electricity charges. Since 1996, we have operated a central information system that allows us to directly credit users who are affected by these quality or delivery deficiencies in the amount of the applicable fines.

Fines and penalties that are not directly related to services rendered to our users are owed to the ENRE, including fines imposed on us by the ENRE for any network installations found to create a safety or security hazard in a public space, such as streets and sidewalks. In addition, the ENRE may fine us for furnishing it inconsistent required technical information. Fines paid to the ENRE are deposited in the Third-Party Reserve Fund of the ENRE(Reserva de Fondos de Terceros del ENRE) in an account held with Banco Nación. Payments accumulate in the account until the amount deposited reaches Ps.5.6 million at which point, with the ENRE’s authorization, the amount is proportionally distributed among our users.

The following table shows the adjustments to Edenor’s standalone accruals for ENRE fines and penalties, including current fines and penalties and adjustments to past fines due to increases in our tariffs pursuant to the Adjustment Agreement, for the periods specified:

	Year ended December 31,
	(in millions of Pesos)
	2019	2018	2017
Accruals at beginning of year	10,660.9	9,477.2	10,012.3
ENRE Fines and Penalties	1,124.4	5,660.6	1,798.2
Quality of Technical Service	(3,048.1)	2,315.9	547.7
Quality of Technical Product	(715.9)	342.3	(1.2)
Quality of Commercial Service	943.7	1,473.1	274.5
Public Safety	(897.1)	970.1	556.2
Transport Technical Function	(4.5)	(2.3)	4.2
Reporting Violations	(483.3)	219.6	351.1
Non-compliance with the investment plan	-	213.3	-
Others	(109.1)	128.6	65.7
Agreement on the Regularization of obligations	5,438.7	-	-
Payments of the year	(896.6)	(806.6)	(248.4)
Quality of Technical Service	(299.8)	(616.9)	(164.5)
Quality of Technical Product	(67.6)	(21.4)	(9.8)
Quality of Commercial Service	(282.3)	(49.4)	(74.1)
Public Safety	(246.9)	(118.9)	-

Result from exposure to inflation for the year	(3,569.7)	(3,670.3)	(2,084.9)
Accruals at year‑end	7,319.0	10,660.9	9,477.2

Note: The facts or events that generated the amounts charged in each period may have occurred in prior periods and not necessarily in the period in which the charge is made.

Our fines and penalties imposed on us by the ENRE amounted to Ps.1,124.4 million and Ps. 5,660.6 million as of December 31, 2019 and 2018, respectively.

As of December 31, 2019, total accrued fines and penalties imposed on us amounted to Ps.7,319.0 million, of which Ps.2,269.7 million (including accrued interest) corresponded to penalties accrued but not yet imposed on us and Ps. 5,049.3 million (including accrued interest) correspond to penalties imposed on us but not yet paid.

Additionally, pursuant to Note No. 125,248 dated March 29, 2017, the ENRE set the new penalty determination and adjustment mechanisms in relation to the control procedures, the service quality assessment methodologies, and the penalty system applicable as from February 1, 2017 for the 2017 – 2021 period established by ENRE Resolution No. 63/17.

In accordance with the provisions of Sub-Appendix XVI to such Resolution, the Company is required to submit within a term of 60 calendar days, the calculation of global indicators, interruptions for which force majeure has been alleged, the calculation of individual indicators, and shall determine the related discounts, crediting the amounts thereof within 10 business days. In turn, the ENRE will examine the information submitted by the Company, and in the event that the crediting of such discounts is not verified, it will impose a fine, payable to the Federal Government, for an amount equivalent to twice the value of the original amount that should have been recorded.

In this regard, the ENRE has implemented an automatic penalty mechanism so that the discounts on account of deviations may be credited to customers within a term of 60 days as from the end of the relevant six-month period.

The penalty system provides that penalties are updated in accordance with the variation of distributor’s CPD or by the energy tariff average price as the case may be. Subsequently, through different resolutions concerning penalties relating to the commercial service and the safety on streets and public spaces, the ENRE provided for the application of increases and adjustments, applying for such purpose a criterion different from the one applied by the Company.

Additionally, and following the completion of the RTI process, the ENRE regulated and/or issued new penalty procedures, such as:

ü	ENRE Resolution No. 118/18: It regulated the compensation for extraordinary service provision interruptions.
ü	ENRE Resolution No. 170/18: It regulated the Penalty System for Deviations from the Investment Plan, whereby real investments are compared to the annual investment plan submitted by the Company, and the investment plan carried out for the five-year period is assessed against the five-year plan proposed in the RTI.
ü	ENRE Resolution No. 198/18: New Supplementary Penalty Procedure of Technical Service Quality, which penalizes deviations from quality parameters at feeder level.
ü	ENRE Resolution No. 91/18: Through the filing of charges, the ENRE informs Edenor about the penalty procedure to be applied for failure to comply with meter-reading and billing time periods.
ü	ENRE Resolution No. 5/19: Through the filing of charges, the ENRE notifies Edenor about the penalty system to be applied for failure to comply with customer service timing requirements in commercial offices (Intelligent Routing and Customer Service System – Sistema Inteligente de Direccionamiento y Atención de Usuarios (SIDyAA))

The effects of the resolutions detailed above were quantified by the Company and recognized as of December 31, 2019, without implying consent to the criteria applied.

On May 10, 2019, the Company and the Energy Government Secretariat, on behalf of the Federal Government, entered into the Agreement on the Regularization of Obligations. By virtue of this agreement, the Company (i) undertook to pay users certain penalty and compensation amounts relating to the 2006-2016 period; and (ii ) agreed to make investments, in addition to those agreed upon in the RTI, to contribute to improve the reliability and safety of the service. In return, the Federal Government partially recognized the claim duly made by the Company, by fully offsetting pending obligations and cancelling penalties payable to the National Treasury.

Accordingly, based on the terms of the second clause of the aforementioned agreement, the Company recorded, as of December 31, 2019, the update of the amounts related to “penalties to be used for investments” for a total of Ps.1,468 million, amounting to a total liability (pending of application) of Ps.4,648 million, which was allocated as financial interest.

Finally, in accordance with the Electricity Rate Schedules Maintenance Agreement and in the context of the Productive Reactivation Law, it was agreed that the Company will maintain the quality of the service and comply with the quality parameters set forth in the Concession Agreement, and that the payment of any penalty is postponed until March 1, 2020 and will be paid in 6 installments at its original value plus any adjustments that may apply at the time of payment.

Disruptions

As mentioned above, on May 10, 2019, the Company and the Energy Government Secretariat, on behalf of the Federal Government, entered into the Agreement on the Regularization of Obligations. By virtue of this Agreement, the Company undertook to pay users certain penalty and compensation amounts relating to the 2006-2016 period; and agreed to make investments, in addition to those agreed upon in the RTI. Furthermore, the Company waived any rights to which it may be entitled and abandoned any actions against the Federal Government.

Foreclosure on the Pledge of Our Class A common shares or Revocation of Our Concession

Pursuant to the terms of the Adjustment Agreement, the Argentine Government may foreclose on the pledge of Edenor Class A common shares and sell them in a public bidding process if any of the following events occurs:

·	Edenor incurs penalties in excess of 20% of our gross energy sales, net of taxes (which corresponds to our energy sales) in any given year;
·	Pampa, fails to obtain the ENRE’s approval in connection with the disposition of our Class A common shares;
·	material and repeated breaches of the Concession are not remedied upon request by the ENRE;
·	Pampa creates any lien or encumbrance on our Class A common shares (other than the existing pledge in favor of the Argentine Government);
·	Pampa or Edenor obstruct the sale of the Class A common shares at the end of any management period according to the terms of the Concession;
·	our shareholders amend our articles of incorporation or voting rights in a way that modifies the voting rights of the Class A common shares without the ENRE’s prior approval; or
·	our shareholders or former shareholders fail to desist from any ICSID claim brought against the Argentine Government following the completion of the RTI process and the approval of a new tariff regime.

On February 1, 2017, the ENRE issued Resolution No. 63/17 establishing the new tariff scheme which resulted from the completion of the RTI process, applicable to the following five-year period. Pursuant to the provisions of the Adjustment Agreement, EASA and EDFI withdrew their ICSID claim, and on March 28, 2017, the ICSID recognized the discontinuance of the procedure. See “Item 7. Major Shareholders and Related Party Transactions”.

Upon the occurrence of any of these events, the Argentine Government will have the right to foreclose on the pledge of our Class A common shares and exercise the voting rights of the Class A common shares until the transfer of such shares to a new purchaser occurs, at which time Pampa will receive the proceeds of such transfer, net of a specified penalty payable to the Argentine Government.

In addition, under the terms of our concession, the Argentine Government has the right to revoke our concession if we enter into bankruptcy and the Argentine Government decides that we may not continue rendering services, in which case all of our assets will be transferred to a new state‑owned company that will be sold in an international public bidding process. At the conclusion of this bidding process, the purchase price would be delivered to the bankruptcy court in favor of our creditors, net of any debt owed by us to the Argentine Government. Any residual proceeds would be distributed among our shareholders.

Periodic bidding for control of Edenor

Before the end of each management period under our concession, the ENRE will arrange for an international public bidding procedure to be conducted for the sale of 51% of our capital stock and voting rights in similar conditions to those under which Pampa acquired its stake. Pampa (or its successor) will be entitled to participate in the bid. The person or group offering the highest price will acquire the stock and will pay the offered price to Pampa. If Pampa is the highest bidder or if Pampa’s bid equals the highest bid, it will retain 51% of our stock, but no funds will need to be paid to the Argentine Government and Pampa will have no further obligation with respect to its bid. There is no restriction as to the amount Pampa may bid. In the event Pampa fails to submit a bid or its bid is lower than the highest bid, the Class A common shares will be transferred to the highest bidder and the price paid by the purchaser (except for any amounts owed to the Argentine Government) will be delivered to Pampa. See “Item 7. Major Shareholders and Related Party Transactions—Parent Company Merger Process.”

The first management period was set to expire on August 31, 2007. We presented a request for a five-year extension of the initial management period in May 2007 and on July 5, 2007, the ENRE, pursuant to the Resolution No. 467/07 of the ENRE, agreed to extend the initial management period for an additional five years from the date that the new tariff structure was adopted under the RTI. The remaining 10-year periods will run from the expiration of the extension of the initial management period.The first management period is estimated to end on March 1, 2022.

Default of the Argentine Government

If the Argentine Government breaches its obligations in such a way that we cannot comply with our obligations under our concession or in such a way that our distribution service is materially affected, we may request the termination of our concession, after giving the Argentine Government a 90 days’ prior notice. Upon termination of our concession, all our assets used to provide our electricity distribution service will be transferred to a new state‑owned company to be created by the Argentine Government, which shares will be sold in an international public bidding procedure. The amount obtained in such bidding will be paid to us, net of the payment of any debt owed by us to the Argentine Government, plus compensation established as a percentage of the bidding price, ranging from 10% to 30% depending on the management period in which the sale occurs.

Edenor Network

As of December 31, 2019, the system through which the Company supplies electricity comprises 79 HV/HV, HV/HV/MV and HV/MV transformer substations, which represents 18,999 MVA of installed power and 1,529 kilometers of 220 kV, 132 kV and 27.5 kV high-voltage networks. The MV/LV and MV/MV distribution system comprises 18,484 MV/LV transformers, which represents 8,817 MVA of installed power, 11,454 kilometers of 33 and 13.2 kV medium-voltage lines, and 27,505 kilometers of 380/220 V low-voltage lines.

The table below shows the most significant data related to the transmission and distribution system for the last five years:

Electricity is conveyed from points of interconnection with the Argentine Interconnection System (“SADI”), 500 kV-220 kV Rodríguez Substation, 220 kV Ezeiza Substation, and from the local power plants, mainly Puerto and Costanera. In turn, the transmission network links these nodes with Casanova, Colegiales, Malaver, Matheu, Morón, Rodríguez, Talar and Zappalorto 220 kV head substations, and with Matanza, Ramos Mejía, Agronomía, Puerto Nuevo, Edison, Pilar, and Malvinas 132 kV head substations. Additionally, other local thermal-generation power plants are linked to Pilar, Zappalorto and Matheu Substations.

The transmission and distribution system, together with Edesur S.A. and Edelap S.A.’s systems, form the Greater Buenos Aires system that is operated by SACME, a company jointly controlled by the Company and Edesur S.A. SACME is responsible for the management of the high-voltage regional distribution in the Buenos Aires metropolitan area, coordinating, controlling and supervising the operation of the generation, transmission and distribution network in the City of Buenos Aires and the Buenos Aires metropolitan area, including coordination with the SADI in the Company’s and Edesur’s concession areas.

The Company distributes energy from the high/medium voltage substations through the primary 13.2kV and 33kV system to a secondary 380/220 V low-voltage system, distributing the electricity to final users with varied voltage levels depending on their requirements. In exceptional cases, certain users are supplied with power at higher voltages.

The following main works were performed in 2019:

Transmission structure:

Our transmission network’s structure comprises high voltage (HV: 500, 220 and 132 kV) lines and/or cables that link non-radial operation substations, the interconnection points and the generation. The main development criterion of this network is its adaptability in order to meet the planned demand according to its geographical distribution, considering the various possible generation scenarios and the eventual unavailability of facilities comprising the network. The Company’s HV transmission network takes power mainly from the SADI through the Rodríguez Substation, Ezeiza Substation, Puerto Nuevo and Nuevo Puerto thermal power plants, and Costanera Substation; additionally, it exchanges power with other companies at transmission and distribution level.

In 2019, to improve service quality and meet the growth in demand, the following significant works were carried out in the HV network, among others:

§	Putting into service the expanded 500/220 kV Rodriguez Substation, with a new 800 MVA transformer bank;
§	Putting into service a new 220/132 kV - 300 MVA transformer in Edison Substation and a new 11 km-long 220 kV electrical transmission line that links Malaver and Edison Substations;
§	Replacement of an 8 km-long section of 132 kV three-phase oil-paper cable with an XLPE-type dry cable in one of the electrical transmission lines that link Malaver and Munro Substations. Continuation of replacement works of the second electrical transmission line, which is expected to be put into service in the third quarter of 2020;
§	Continuation of works to link the José C. Paz Substation with the Morón – Matheu Substations’ 132 kV electrical transmission lines. The first stage of the project is expected to be put into service in the third quarter of 2020.

Subtransmission Structure

Our substransmission network is the link between HV (HV/HV) head substations and the substations where voltage is transformed from high to medium (HV/MV), adopting generally the 132 kV voltage level. The overhead network (double radial deviation or double loop deviation) and the underground network (in “simple circuit” loops or double loop deviation) are considered as the basic structure of the subtransmission network.

In 2019, some of the main works performed were:

§	Putting into service a new 132/13.2 kV - 80 MVA transformer in Ramos Mejía Substation with part of the new 13.2 kV switchboard;
§	Replacement of two 132/13.2 kV - 40 MVA transformers in Paso del Rey Substation with two 132/13.2 kV - 80 MVA transformers;
§	Replacement of two 132/13.2 kV - 40 MVA transformers in Altos Substation with two 132/13.2 kV - 80 MVA transformers;
§	Replacement of two 132/13.2 kV - 20 MVA transformers in Puerto Nuevo Substation with two 132/13.2 kV - 40 MVA transformers.

Distribution Structure:

The distribution network comprises all the equipment, medium voltage (13.2 and 33 kV) lines and cables that link subtransmission substations with medium and medium/low-voltage transformer centers. The network’s basic structure consists of open normal operation feeders forming rings with other feeders of another busbar of the same substation or with neighboring substations.

In 2019, the following works were performed, among others:

§	Installation of 36 new feeders in new and existing Substations;
§	Closure between Substations’ MV feeders and installation of 506 new MV/LV transformer centers and 547 power increases, which resulted in a net increase of installed power capacity of 413 MVA.

Network improvement

The improvements made to the networks in 2019 comprised all voltage levels. The most significant improvements are:

·	High-voltage network: replacement of 132 kV and 220 kV disconnectors. Replacement of 132 and 220 kV line protection switchboards.
·	Medium-voltage network: replacement of circuit breakers in substations and installation of internal arc protections in switchboards. Putting into service of a new switchboard in Migueletes substation and continuation of assembly works for a new switchboard in the Del Viso substation. Significant replacement of old technology in the underground network, change of medium and low-voltage transformers, and change of equipment in transformer centers.
·	Low-voltage network: replacement of the underground and overhead network. Reinforcement of the network with product quality problems.

Information Technology and Telecommunications

The Company operates in a dynamic industry with many business challenges. To address these challenges, the Company has continued to make progress through the strategic transformation of its Information Technology and Telecommunications function.

In 2019, we began to implement the multi-year plan developed with the consulting firm Bain & Company, the purpose of which is that both the technology and the working areas are prepared for the challenges posed by the transformation of Edenor.

Thus, we continued adopting new practices and working methodologies with a cross-company vision of the processes, incorporating and developing new digital skills in the team and making progress in consolidating a flexible and robust technology architecture.

Digital architecture, innovation and processes

We began to implement the new Red Hat Fuse integration platform, addressing as a priority the reengineering of the critical integrations associated with management of street works carried out by the staff. This plan, which is expected to continue in 2020, is currently being developed with excellent results. We have implemented the project adopting agile methods, as part of a pilot plan we launched in 2019 with this and other projects.

One of the tools of the digital transformation strategy is smart metering (smart meters). This tool seeks to integrate smart meters of different manufacturers into our technical and application infrastructure.

In order to address this challenge, we designed a smart meter reference architecture, which represents a comprehensive framework that takes into consideration the technical aspects as well as the decision-making criteria and conceptual framework when implementing technologies, with the aim of ensuring that future trademarks and models of smart meters can integrate swiftly into the infrastructure of our applications.

As regards processes, weimplemented, after evaluation and testing, sixteen transactional robots (RPA) that allowed us to automate certain high-volume, repetitive processes, saving approximately 4,000 man-hours per month, in addition to improving the quality of the information.

With regard to our operational model, we put in place a Service Center aimed at improving the efficiency of resources in charge of customer support, incident resolution and everyday technology services, producing a higher quality service, while optimizing response timing and quality.

Commercial Processes

We continued sustaining the development of an increasingly digital relationship with our customers by implementing the newedenordigital, thus migrating to a completely redesigned and new platform from the technological viewpoint, incorporating the possibility of carrying out procedures digitally and facilitating customer self-management. This new technology architecture will enable us to support growth of future applications and functionalities.

Within the framework of the new commercial customer service model, digital experience centers were developed and implemented in some commercial offices, including the installation of 35 live chat sound and video booths and 20 self-service terminals.

We completed the implementation of the new Avaya contact center platform, a project that had begun in 2018. We now have a state-of-the-art omnichannel technology, capable of supporting the growth of digital procedures.

Technical, operating and support processes

In the framework of our strategy towards a new more flexible and robust technology architecture, we migrated our ERP SAP to the Hana database and took it to the cloud. This resulted in an optimization of the back office’s critical processes times, a better user experience and a reduction in infrastructure costs.

With regard to the contractor management model, we carried out an integral review of the supplies management process and implemented a technology solution. This translated into a more accurate inventory in the contractors’ warehouses, avoiding inefficiencies in the stock of supplies and improving supply times. Additionally, we developed a mobile application to manage the contractors’ daily reports, seeking to achieve greater efficiency and higher quality information.

Data

To help drive business decisions, we also took into consideration the development of the governance model and the quality and analysis of data, seeking to introduce more advanced forms of analysis and intelligence practices, including technology tools and the development of analytical competencies.

In this line of action, we implemented several information models that incorporate artificial intelligence (machine learning). In 2019, we applied those models to track energy losses and fraud, predict faults in MV lines, and carry out customer segmentation according to payment behavior.

We also implemented six self-service-focused information models, which permits information to remains available to all areas for them to self-manage when analyzing data.

Additionally, in 2019 we developed ten use cases under the “Data Lab” concept; experimental and multi-disciplinary work teams were formed to answer business-related questions, on the basis of data analysis. In 2020 we will continue building this path as an initiative that promotes the development of analytical skills in the entire organization.

Cybersecurity

While making progress with the development of the multi-year industrial cybersecurity plan, a new infrastructure that manages the separation of the industrial network (SCADA/DMS, among others) and the corporate network was implemented with the aim of preventing unauthorized traffic exchange between both networks and improving responsiveness in the event of a cyberattack.

The email platform was substantially improved, with capability to not only detect and block known and unknown advanced threats, but also protect our infrastructure from phishing, ransomware and spoofing.

Furthermore, as part of the SAP migration to the cloud project, the new landscape was implemented on AWS (Amazon Web Services), following the best security practices for the design, maintenance and operation of the new infrastructure.

Additionally, we worked on the design of the Disaster Recovery Plan (DRP), seeking to respond and recover in the minimum possible time the business’ core applications in the event of serious incidents.

Infrastructure

Continuing with the development of a future smart grid, fiber optic cables continued to be laid to extend connectivity to transformer centers, substations, buildings and commercial offices, having more than 400 transformer centers connected and increasing the capacity of our own fiber optic network with nearly 1,500 Km in operation.

Moreover, as part of the development of the metering network, we were able to connect to our central systems nearly 2,500 meters distributed throughout the concession area. This implied working on the monitoring, connectivity maintenance, and system integration of all remotely-managed and remotely-read meters.

We implemented a new monitoring service to anticipate anomalies in both remotely-read and smart meters, inedenordigital, and in self-management terminals, among others.

We also put in place an online portal that provides information about the availability level of Edenor‘s services and critical applications.

Users

The following graph shows the evolution of our user base over the last four years:

As of December 31, 2019, Edenor served 3,119,279 users. We define a “user” as one meter.

Edenor Tariff Categories

Edenor classifies its users pursuant to the following tariff categories:

·	Residential (T1-R1 to T1-R9): residential users whose peak capacity demand is less than 10kW. In 2019, this category accounted for approximately 43.1% of our electricity sales.
·	Small commercial (T1-G1 to T1-G3): commercial users whose peak capacity demand is less than 10kW. In 2019, this category accounted for approximately 8.7% of our electricity sales.
·	Medium commercial (T2): commercial users whose peak capacity demand is equal to or greater than 10kW but less than 50kW. In 2019, this category accounted for approximately 8% of our electricity sales.
·	Industrial (T3): industrial users whose peak capacity demand is equal to or greater than 50kW. This category is applied to high-demand users according to the voltage at which each user is connected. The voltage ranges included in this category are the following: (i) Low Voltage (LV): voltage less than or equal to 1 kV; (ii) Medium Voltage (MV): voltage greater than 1kV but less than 66 kV; and (iii) High Voltage (HV): voltage equal to or greater than 66kV. In 2019, this category accounted for approximately 18% of our electricity sales. This category does not include users who purchase their electricity directly through the WEM under the wheeling system.
·	Wheeling System: large users who purchase their electricity directly from generation or broker companies through the WEM. These tariffs follow the same structure as those applied under the Industrial category described above. As of December 31, 2019, the total number of such large users was 684, and this category represented approximately 18.3% of our electricity sales.
·	Others: public lighting (T1-PL) and shantytown users whose peak capacity demand is less than 10kW. In 2019 this category accounted for approximately 3.7% of our electricity sales. See “Framework Agreement (Shantytowns)”.

We aim to maintain an accurate categorization of our users to charge the appropriate tariff to each user. In particular, we focus on our residential tariff categorizations to both minimize the number of commercial and industrial users who are classified as residential users and identify residential users whose peak capacity demand exceeds 10 kW and therefore do not qualify as residential users.

We rely on the following measures to detect incorrectly categorized users:

·	reporting carried out by our employees tasked with reading meter information to identify observed commercial activities which are being performed by residential users,
·	conducting internet surveys to identify advertisements for commercial services (such as medical or other professional services) that are linked to a residential user’s address, and
·	analyzing user demand to determine whether we should further evaluate the peak capacity demand of a given user whose use might exceed 10kW.

Reading, Billing and Collecting

The Company bills its users based on their tariff categories. Residential users and small business users are billed a fixed monthly charge and a variable charge based on each unit of energy consumed. The savings in energy consumption obtained by users are calculated by comparing the current consumption with the consumption of the registered user during the same period in 2015.

On January 29, 2016, pursuant to Resolution No. 1/16, the ENRE established a monthly billing scheme providing for bimonthly consumption reading. On February 1, 2017, the ENRE issued Resolution No. 63/17, which established a new tariff scheme that maintains the billing methodology of Resolution No. 1/16.

In 2017, the implementation of the remote meter reading system for the tariff 3 (high demand) and tariff 2 (medium demand) user segments gradually began.

As part of the measures aimed at the restructuring of the electricity sector after the RTI became effective, a system was implemented for the monthly billing of the consumption measured every two months, dividing for such purpose the bimonthly consumption into two similar monthly periods with a view to providing T1 (small demand) users with more timely information regarding their consumption and facilitating payment.

Additionally, to measure the amount of actual readings for which service is billed, limits of estimated readings have been established in order to maximize user billing on actual readings. The Concession Agreement initially stipulated that the maximum limit of estimates was 8% of the total bills issued. As from the effective date of the RTI, a maximum of 2% of estimated bills over the total number of bills issued for each electricity rate category has been set as a global indicator. The Company complied with this indicator and improved it to an average of less than 1% in 2019.

With more than 17 million annual readings, our meter reading process has an effectiveness percentage in which 94.83 % of the meter readings are billed in first instance, which subsequently directly impacts the quality of the billing: less than 0.08 % of the readings have given rise to a complaint.

Technology adaptations, such as remote meter readings, changes made in procedures, and the opening of new contact channels to coordinate meter readings notably reduced the number of cases that could not be billed in first instance, avoiding estimated consumption. Therefore, the subsequent processes of the commercial cycle have a regular flow; bill distribution tasks are more organized, due dates become more predictable and cash flows predictability is improved.

In 2019, estimated consumption cases accounted for only 0.27% of total consumption billed.

Our residential and small commercial users are divided into subcategories based on their consumption, as follows:

Residential (Tariff 1-R or T1-R):

·	Tariff 1-R1: monthly energy consumption less than or equal to 300 KWh;
·	Tariff 1-R2: monthly energy consumption greater than 301 KWh and less than or equal to 650 KWh;
·	Tariff 1-R3: monthly energy consumption greater than 651 KWh and less than or equal to 800 KWh;
·	Tariff 1-R4: monthly energy consumption greater than 801 KWh and less than or equal to 900 KWh;
·	Tariff 1-R5: monthly energy consumption greater than 901 KWh and less than or equal to 1000 KWh;
·	Tariff 1-R6: monthly energy consumption greater than 1001 KWh and less than or equal to 1200 KWh;
·	Tariff 1-R7: monthly energy consumption greater than 1201 KWh and less than or equal to 1400 KWh;
·	Tariff 1-R8: monthly energy consumption greater than 1401 KWh and less than or equal to 2800 KWh; and
·	Tariff 1-R9: monthly energy consumption greater than 2800 KWh.

Social Tariff

The social tariff applies to the same subcategories of residential rates, for which there is no variable charge for the first 150 KWh of monthly consumption until November 2017. Since December 2017, mechanisms for discounts based on consumption (150 KWh/month at the price) of Stabilized Energy Price (“PEE”) energy, and the second (150 KWh/month at 50% of the PEE) and are differentiated according to whether they generate savings over the same period of 2015, provided for in Resolution of the ENRE No. 603/17. However, since the beginning of 2019, bonuses for savings have been eliminated.

To qualify for the social tariff, users must comply with one of the following characteristics:

·	retirees or pensioners who receive two gross minimum wages or less;
·	workers in employment relationships that earn two gross minimum wages or less;
·	self-employed individuals falling in categories that correspond to annual income which monthly break out reaches two minimum gross wages or less;
·	grantees of social programs;
·	registered in the self-employed (monotributista) social category;
·	grantees of non-contributory pensions with gross income equal to or less than two minimum wages;
·	grantees of unemployment insurance;
·	domestic service incorporated into the relevant special social security scheme;
·	holders of the Lifetime Pension for Veterans of the South Atlantic War;
·	persons with a disability certificate issued by a competent authority; and
·	persons suffering or living with another person suffering from an illness whose treatment involves electrodependence (in this case, the variable charge for the first 600 KWh monthly consumption is free).

Small commercial (Tariff 1-G):

·	Tariff 1-G1: bimonthly energy demand less than or equal to 1600 KWh;
·	Tariff 1-G2: bimonthly energy demand greater than 1600 KWh but less than or equal to 4000 KWh; and
·	Tariff 1-G3: bimonthly energy demand greater than 4000 KWh.

Medium Commercial (Tariff 2):

Medium commercial users (demand greater than 10 kW but less than 50 kW - Tariff T2) are billed on a monthly basis, as follows: (1) a fixed charge per invoiced issued; (2) a fixed charge per each “scope of supply” of kW capacity agreed; (3) a fixed charge based on a maximum kW capacity (applicable to the maximum capacity registered during the billing period); (4) a variable charge based on each unit of energy consumed, without hour discrimination; and, (5) if applicable, a cos phi surcharge.

Industrial (Tariff 3):

Industrial users (demand equal or greater than 50 kW - Tariff T3) are billed on a monthly basis, as follows: (1) a fixed charge per invoice issued; (2) a fixed charge per each “scope of supply” of kW capacity agreed for low, medium or high voltage, with or without electricity consumption; (3) a fixed charge based on a maximum kW capacity registered, in low, medium or high voltage, applicable to the maximum capacity registered during the billing period; (4) a charge resulting from the electricity supplied in the voltage corresponding to the provision, in accordance with the consumption registered in each of the tariff timetables: “peak”, “night-time” and “remaining hours”; (5) if the supply is carried out in continuous current, a surcharge equivalent to a percentage of the price of the rectified electricity; and (6), if it is applicable, a cos phi surcharge.

Public Lighting (AP):

Public lighting users are billed a monthly variable energy charge based on each unit of energy consumed.

The table below shows the number of Edenor users per tariff category as of December 31, for the years 2019, 2018, 2017 and 2016, respectively:

	As of December 31,
	2019	2018	2017	2016
T1R	2,757,794	2,677,693	2,580,003	2,497,386
T1G	322,255	322,479	328,715	327,198
T2	31,045	31,993	33,426	34,662
T3	6,888	6,876	6,874	6,856
Wheeling system	675	679	706	714
Other*	576	619	605	434
Total	3,119,233	3,040,339	2,950,329	2,867,250

* Represents public lighting and shantytown users.

All of the meters are read with portable meter‑reading terminals, either with manual access or optical reading (in the case of electronic meters for T2, T3 and certain T1 users). The systems validate the readings, and any inconsistent reading is checked and/or corrected before billing. Estimates of user usage were significantly reduced as a result of this new billing system. Once the invoices are printed, independent contractors in each operating area, that are subject to strict controls, distribute them.

Slow-Paying Accounts and Past Due Receivables

Pursuant to the Concession Agreement, certain procedures were established to reduce delinquency and enable collection, overseen with strict observance by the Commercial Department.

Municipal accounts make up a significant number of our arrears’ accounts. The methods of collection on such arrears vary for each municipality. One method of collection is to withhold from the municipalities certain taxes collected from the public by us on behalf of the municipalities and using such taxes to offset any past due amounts owed to us by such municipalities. Another method of collection is to enter into refinancing agreements with the municipalities. Such methods significantly reduce the number of arrears accounts.

Our past due receivables increased from Ps.3,031.0 million as of December 31, 2018 to Ps.3,461.4 million as of December 31, 2019, due to socioeconomic situation and the effect of the electricity rate increase applied during 2019, which raised the amount of the average balance per customer. Past due receivables could also be measured as an equivalent of billing days - according to this measure, an increase from 11.64 to 13.89 days is observed.

Throughout 2019, several actions were performed to control the past due receivables, including the following ones:

· Payment strategies to facilitate new payment channels;

· Suspension of the electricity supply service to customers with significant outstanding balances;

· Special notices prompting payment;

· Personalized calls to negotiate and prompt payment;

· Sending e-mails informing about unpaid balances;

· Management and follow-up plans;

· More flexible payment plans; and

· Management of inactive accounts, including external collection agencies.

The following graph shows Edenor’s delinquent balances as of December 31, of each year:

We also supply energy to low-income areas pursuant to the framework agreement with the Argentine Government and the Province of Buenos Aires, for which certain payments are still owed to us. See “Framework Agreement (Shantytowns).”

Energy Losses

Energy losses are equivalent to the difference between energy purchased and energy sold, and may be classified as technical and non-technical losses. Technical losses represent the energy that is lost during transmission and network distribution as a consequence of natural heating of the transformers and conductors that transmit the electricity from the generating plants to the users. The non-technical energy losses represent the remainder of our energy losses mainly due to the illegal use of its services and administrative and technical errors.

Energy losses require us to purchase additional energy to satisfy apparent demand, thereby increasing costs. Furthermore, illegally tied-in users typically consume more electricity than the average level of consumption for their category. We are unable to recover from users the cost of electricity purchased beyond the average loss factor set at 10% pursuant to our concession. Therefore, the reduction of energy losses reduces the amount of energy we have to purchase to satisfy apparent demand but cannot invoice, and increases the amount of electricity actually sold.

At the time of the privatization of the electricity sector in 1992, our total energy losses were approximately 26.54%. At that time, our non-technical losses were estimated at 17%, of the energy purchased; with over half of that amount due to fraud and illegal use of our service. In response to the high level of losses, we implemented a loss reduction plan in 1992, which emphasized accurate measurement of energy consumption through periodic inspections, reduction of administrative errors, regularization of shantytowns, reduction of illegal direct connections, provision of services to shantytowns and reduction of technical losses.However, from time to time, the Company has experienced an increase in non-technical losses as economic crises have impaired the ability of its users to pay their bills, and an increase in technical losses relative to the increase in the volume of energy that the Company supplied during such periods.

Our goal is to maintain our energy losses at an optimal level, while also considering the cost of reducing such losses and the level at which we are reimbursed for the cost of these losses under our concession. Our procedures for maintaining an optimal level of losses are focused on improving collections to ensure that users pay for all the energy that they consume and making investments in our network to control technical losses. To reduce the theft of electricity we have implemented vigilance and special technologies, such as networks that cannot be reached using normal ladders, shields close to the electricity posts, concentric cables, shielded meters and suspension of electricity service, among other remedies.

In 2019, the plan launched in previous years continued to be implemented, substantially increasing the installation of self-managed meters (MIDEs) under a plan that consists of having 250,000 meters in place in 2020. The plan is aimed at normalizing clandestine consumers, inactive customers and chronic delinquent customers. In 2019, 75,160 MIDEs were installed, 57,000 of which are currently operative, reaching 199,728 enabled MIDEs in the entire concession area.

In Regions II and III, new shantytowns were formed while existing shantytowns continued to grow. In 2019, the increase in total losses was mainly due to the theft of energy in these areas.

The installation of the new type of multiple concentric network (MULCON), which had begun by the end of 2018, has continued leveraging MIDE’s functionalities and increasing invulnerability (by adding security to the meter system) in neighborhoods with a high fraud rate.

The following table illustrates our estimates of the approximate breakdown between technical and non-technical energy losses experienced in our concession area for the periods indicated:

	Year ended December 31,
	2019	2018	2017	2016
Technical losses	9.6%	8.4%	8.8%	9.6%
Non technical losses	10.3%	9.8%	8.3%	7.4%
Total losses	19.9%	18.2%	17.1%	17.0%

Framework Agreement (Shantytowns)

On January 10, 1994, the Company, Edesur, the Argentine Government and the Government of the Province of Buenos Aires entered into a Framework Agreement, whose purpose was to establish the guidelines under which the Company was to supply electricity to low-income areas and shantytowns (the “Framework Agreement”).

In accordance with the terms of our concession and given the nature of public service that the law grants for the distribution of electricity, the Company is required to supply electricity to all users within the concession area, including low-income areas and shantytowns located within our concession area. In October 2003, Edenor, Edesur and Edelap entered into a framework agreement with the Argentine Government and the Province of Buenos Aires (the “2003 Framework Agreement”) to regulate the supply of electricity to low-income areas and shantytowns. Under the 2003 Framework Agreement, the Company has the right to receive compensation for the services provided to shantytowns from funds collected from residents of each relevant shantytown, the Municipality in which it is located and, if there is a shortfall, by a special fund supported by the Argentine Government and the Government of the Province of Buenos Aires. The Argentine Government and the Province of Buenos Aires contribute an amount equal to 21% and 15.5% of such compensation, respectively, net of taxes, paid by those users with payment problems and meter irregularities, which are transferred to distributors such as Edenor as compensation. On June 23, 2008, Edenor entered into an amendment to the 2003 Framework Agreement (the “Amended 2003 Framework Agreement”) with the Argentine Government, the Province of Buenos Aires and the other national electric distributors extending the terms of the 2003 Framework Agreement. The Amended 2003 Framework Agreement expired on December 31, 2010.

On July 22, 2011, the Company, together with Edesur and Edelap, entered into an addendum (the “Addendum”) with the Argentine Government and the Government of the Province of Buenos Aires, to extend the Amended 2003 Framework Agreement for an additional term of four years (from January 1, 2011, to December 31, 2014). Such extension was approved on September 21, 2012 by Resolution No. 248/12 issued by the ENRE and ratified by the Ministry of Planning pursuant to Resolution No. 247/12. On December 31, 2014 the Amended 2003 Framework Agreement expired.

On August 3, 2017, an extension to the Framework Agreement until September 30, 2018 was signed, which represents the recognition of revenue relating to the distribution of electricity to low-income areas and shantytowns for the January 1, 2015 - September 30, 2018 period for an amount of Ps.764.5 million.

On May 10, 2019, the Company and the Federal Government entered into an additional addenda to the Framework Agreement, extending the term thereof until May 31, 2019. Additionally, such addenda provided for the following:

·	The Federal Government’s commitment to settle the amounts of its economic contribution for the supply of electricity to shantytowns, after deducting the energy associated with the social tariff;
·	That the Company may assign the receivable amounts recognized by this extension to Edesur. In this regard, the relevant agreement on the assignment of receivables was signed, whereby Edesur, in consideration for the assigned receivables, paid to Edenor Ps.167.8 million.

Consequently, as of December 31, 2019 the Company recognized revenue from the sale of electricity under the Framework Agreement until December 31, 2018 for Ps.470.8 million, which stated in constant values amounts to Ps.591.3 million, and for the first five months of 2019 for Ps.205.5 million, which stated in constant values amounts to Ps.220.2 million, both related to the Federal Government’s participation in the Framework Agreement.

Furthermore, within the framework of the transfer of jurisdiction of the public service of electricity distribution that had been provided for by Law No. 27,467, the Government of the Province of Buenos Aires enacted Law No. 15,078 on General Budget, pursuant to which it set forth that the Province of Buenos Aires would pay as from January 1, 2019 for the low-income areas and shantytowns’ electricity consumption the same amount as the one paid in 2018, and that any amount in excess of that would have to be borne by Municipalities in whose territories the particular shantytowns are located. Such consumption has to be previously approved by the regulatory agencies or local authorities having jurisdiction in each area. In this regard, on November 27, 2019, the Municipality of General San Martín filed a petition with the Supreme Court to obtain a provisional remedy, claiming that the section of Law No. 15,078 that refers to this matter is unconstitutional. As of December 31, 2019, the Company did not recognize revenue for this concept.

Finally, in views of recent measures adopted by national and provincial authorities as of the date of this annual report,including the Productive Reactivation Law, the Company does not know which are the guidelines to be followed concerning the electricity consumption by low-income areas and shantytowns in connection with periods that have not been recognized as well as future periods.

Insurance

As of December 31, 2019, the Company is insured for partial and total property loss and damage, including those due to floods, fires and acts of nature, up to U.S.$1,604.3 million, with the following deductibles:

§	transformers, between U.S.$175,000 and U.S.$850,000 (depending on their power level);
§	equipment of sub-stations (not including transformers), U.S.$75,000;
§	commercial offices, U.S.$1,500 for each office;
§	deposits and other properties, U.S.$25,000; and
§	terrorism risk, U.S.$50,000, being the maximum insured amount of U.S.$7,000,000.

We are also insured against theft of safe-deposit boxes, and cash/valuables in commercial offices and cash/valuables-in-transit for a maximum amount of U.S.$250,000 and U.S.$5,000, respectively, with a deductible of U.S.$250.

In addition, we maintain the following insurances, subject to customary deductibles and the conditions established for each coverage:

§	Directors and Officers Liability (D&O);
§	General Liability;
§	Vehicles;
§	Environmental insurance (requested by governmental authorities);
§	Surety insurance (requested by governmental authorities);
§	Electronic equipment insurance;
§	Mandatory life insurance for all our employees which is maintained in accordance with Argentine law; and,
§	Optional life insurances for all our employees.

The Company has been analyzing cybersecurity coverages offered by different insurance companies, which cover the following risks:

§	Responsibility for data privacy (personal / corporate / contracted companies);
§	Responsibility for network security;
§	Responsibility for electronic content;
§	Cyber extortion;
§	Loss of digital assets (theft / damage / destruction / data contamination); and
§	Business interruption

However, there is not yet a company that covers material damage to the property of the insured, as well as damage to third parties or damage to property of third parties, as a result of a cyber-attack.

After a bidding process, none of the insurance company participants has offered a business-interruption coverage. Although, we consider our insurance coverage to be adequate and in accordance with the prevailing standards for the industry, see “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—In the event of an accident or other event not covered by our insurance, we could face significant losses that could materially adversely affect our business and results of operations. ”

Environmental Management

In Argentina, the Argentine Government, the provincial Governments and the Government of the City of Buenos Aires are empowered to legislate on natural resources and environmental protection issues. The 1994 Constitution reaffirms this principle, assigning to the Argentine Government the establishment of broad environmental guidelines and to the provincial Governments and the Government of the City of Buenos Aires the duty to implement the necessary legislation to attain national environmental goals. The environmental policy for the electricity market was formulated by the former SE and implemented by the ENRE. Areas regulated by the ENRE include the tolerance level for electromagnetic fields, radio interference, voltage of contact and pass, liquid spills, disposal and handling of solid wastes, noise and vibration admissible levels and use, and the transport and storage of hazardous waste, including polychlorinated biphenyl (PCB), a viscous substance which was historically used to lubricate electrical transformers. The Argentine Environmental Law required that we eliminate the use of PCB in our transformers before January 1, 2011.

Over the course of 2009, we completed the removal of PCBs from all our transformers with contaminated coolant oils exceeding 50 ppm (parts per million), the limit established by National Law No. 25,670.

As part of our investment plan, we made important improvements to our network and implemented technological innovations which reduced the impact of these improvements on the environment. We are required to apply for licenses from the ENRE for all our business activities, which include certain requirements related to environmental protection. To the best of our knowledge, we are in compliance in all material respects with all applicable environmental standards, rules and regulations established by the ENRE, the former SE and other federal, provincial and municipal authorities. We have implemented environmental management programs to evaluate environmental impact and to take corrective actions when necessary. In addition, we have in place an environmental emergency plan designed to reduce potential adverse consequences should an environment contingency occur. Finally, as part of our environmental actions, we improved and deepened the program of rational uses of energy in our buildings and in our user equipment.

Regarding the addition of new installations and related construction works, all of the studies corresponding to the environmental impact evaluation required by law are being performed. These analyses are presented to local environmental authorities and submitted to consideration of the local communities in public audiences held as required by applicable regulations for the issuance of an environmental aptitude certificate.

On October 19, 1999, the Argentine Institute of Normalization (Instituto Argentino de Normalización) certified that we have an environmental management system that is in accordance with the requirements of the standards set by the International Standardization Organization (ISO) as specified in its release, ISO 14001/15, which relates specifically to environmental management systems. This certification is reaffirmed on an annual basis, most recently as of November 2019.

Section 22 of Law No. 25,675 requires all persons whose activities maintain an Environmental Complexity Level (ECL) that implies a risk of damage to the environment, such as any activity of the Company, to obtain environmental insurance for a certain minimum coverage

Seasonality

Demand for our services fluctuates on a seasonal basis. For a discussion of this seasonality of demand, see “Item 5. Operating and Financial Review and Prospects—Demand —Seasonality of Demand”.

New Brand and Institutional Image

In 2017, the Company launched its new brand and institutional image. The goal of this change is to reflect a modern company, with an emphasis on technology, innovation and user service quality, as well as portray the Company as a model public utility company, with a focus on two pillars: efficiency and proximity.

The new brand and institutional image continued during 2019 and was visible throughout the different levels of the Company’s operations, including the corporate buildings, our commercial offices, corporate vehicles, invoices, among others. The principal actions were:

·	Industrial safety: in November 2019, the Company successfully passed the annual audit conducted by the Argentine Institute for Standardization and Certification (“IRAM”) on the management of Industrial Safety, which allowed it to maintain the OHSAS 18001 certification it had obtained in 2005. In order to comply with these guidelines related to Occupational Health and Safety, the Company performed several activities, resulting in improved accident indicators from 2016 to 2019.
·	Public safety: in 2019 the Company successfully passed the annual audit conducted by the IRAM on the Public Safety System (PSS) according to ENRE Resolution No. 421/11, thus maintaining the related certification.
·	Quality: the Company successfully passed the external maintenance audit of the Integrated Management System (IMS), which was conducted in November 2019. The certifying entity IRAM highlighted as strengths the technical level and the commitment to service of the interviewed technical staff, as well as the assignment of technology and financial resources to improve the service and the customer service.
·	Environmental management: in 2019, the Provincial Agency for Sustainable Development of the Province of Buenos Aires granted Edenor the environmental clearance certificate, for certain works projects developed in such province.
·	Community actions: in 2019, the Corporate Social Responsibility (CSR) area was created, within the Human Resources Department, with the aim of enhancing and integrating all the actions carried out by Edenor in the communities where we operate. For this purpose, the electricity inclusion project, the Educational Program (“edenorchicos”) and the Scholarship and mentoring program were developed.
·	Sustainable energy: in 2019, Law No. 27,424 on “Program for the Promotion of Distributed Generation of Renewable Energy Integrated in the Public Electricity Grid” was enacted. This law allows users to install in their premises renewable energy generation equipment for self-consumption and sale of generation surpluses injected into Edenor‘s network. On the other hand, we began to implement the first phase of the T3 customer meters modernization plan. This phase consists of replacing 1,000 conventional meters with smart meters. It is expected that the total universe of T3 customer meters will be replaced between 2020 and 2022.Continuing with actions developed to provide medically dependent on power customers with a preferential customer service, we launched a smart meter installation pilot plan for a reduced number of cases (approximately 10 % of the universe). In 2019, we increased the number of remotely-managed MIDEs to a total of 26,000, distributed in 139 transformer centers. Moreover, with the aim of making power outage and restoration detection in sensitive customers more efficient, and building synergy with the smart meter implementation projects, we began to develop tools to achieve an automatic alert generation in such group of customers.

The Argentine Electricity Industry

Historical Background

Electricity was first made available in Argentina in 1887 with the first public street lighting in Buenos Aires. The Argentine Government’s involvement in the electricity sector began in 1946 with the creation of theDirección General de Centrales Eléctricas del Estado (General Directorate of Electric Power Plants of the State) to construct and operate electricity generation plants. In 1947, the Argentine Government createdAgua y Energía Eléctrica S.A. (Water and Electricity, or AyEE) to develop a system of hydroelectric generation, transmission and distribution for Argentina.

In 1961, the Argentine Government granted a concession to theCompañía Italo Argentina de Electricidad (Italian‑Argentine Electricity Company, or CIADE) for the distribution of electricity in a part of the City of Buenos Aires. In 1962, the Argentine Government granted a concession formerly held by theCompañía Argentina de Electricidad (Argentine Electricity Company, or CADE) toServicios Eléctricos del Gran Buenos Aires (Electricity Services of Greater Buenos Aires, or SEGBA), our predecessor, for the generation and distribution of electricity to parts of Buenos Aires. In 1967, the Argentine Government granted a concession to Hidroeléctrica Norpatagónica S.A. (Hidronor) to build and operate a series of hydroelectric generation facilities. In 1978, CIADE transferred all of its assets to the Argentine Government, following which CIADE’s business became Government‑owned and operated.

By 1990, virtually all of the electricity supply in Argentina was controlled by the public sector (97% of total generation). The Argentine Government had assumed responsibility for the regulation of the industry at the national level and controlled all of the national electricity companies, AyEE, SEGBA and Hidronor. The Argentine Government also represented Argentine interests in generation facilities developed or operated jointly with Uruguay, Paraguay and Brazil. In addition, several of the Argentine provinces operated their own electricity companies. Inefficient management and inadequate capital spending, which prevailed under national and provincial Government control, were in large measure responsible for the deterioration of physical equipment, decline in quality of service and proliferation of financial losses that occurred during this period.

In 1991, as part of the economic plan adopted by former President Carlos Menem, the Argentine Government undertook an extensive privatization program of all major state‑owned industries, including within the electricity generation, transmission and distribution sectors. In January 1992, the Argentine Congress adopted Law No. 24,065 (the “Regulatory Framework Law”), which established guidelines for the restructuring and privatization of the electricity sector. The Regulatory Framework Law, which continues to provide the framework for regulation of the electricity sector since the privatization of this sector, divided generation, transmission and distribution of electricity into separate businesses and subjected each to appropriate regulation.

The ultimate objective of the privatization process was to achieve a reduction in tariffs paid by users and improve quality of service through competition. The privatization process commenced in February 1992 with the sale of several large thermal generation facilities formerly operated by SEGBA, and continued with the sale of transmission and distribution facilities (including those currently operated by our company) and additional thermoelectric and hydroelectric generation facilities.

Regulatory and Legal Framework

Role of the Government

The Argentine Government has restricted its participation in the electricity market to regulatory oversight and policy-making activities. These activities were assigned to agencies that have a close working relationship with one another and occasionally even overlap in their responsibilities. The Argentine Government has limited its holding in the commercial sector to the operation of international hydropower projects and nuclear power plants. Provincial authorities followed the Argentine Government by divesting themselves of commercial interests and creating separate policy-making and regulatory entities for the provincial electricity sector.

Limits and Restrictions

To preserve competition in the electricity market, participants in the electricity sector are subject to vertical and horizontal restrictions, depending on the market segment in which they operate.

Vertical Restrictions

The vertical restrictions apply to companies that intend to participate simultaneously in different sub-sectors of the electricity market. These vertical restrictions were imposed by Law No. 24,065, and apply differently depending on each sub-sector as follows:

Generators

Under Section 31 of Law No. 24,065, neither a generation company, nor any of its controlled companies or its controlling company, can be the owner or a majority shareholder of a transmitter company or the controlling entity of a transmitter company; and

Under Section 9 of Decree No. 1398/92, since a distribution company cannot own generation units, a holder of generation units cannot own distribution concessions. However, the shareholders of the electricity generator may own an entity that holds distribution units, either as shareholders of the generator or through any other entity created with the purpose of owning or controlling distribution units.

Transmitters

·	Under Section 31 of Law No. 24,065, neither a transmission company nor any of its controlled companies or its controlling entity can be the owner or majority shareholder or the controlling company of a generation company;
·	Under Section 31 of Law No. 24,065, neither a transmission company, any company controlled by a transmission company nor any company controlling a transmission company can own or be the majority shareholder or the controlling company of a distribution company; and
·	Under Section 30 of Law No. 24,065, transmission companies cannot buy or sell electricity.

Distributors

·	Under Section 31 of Law No. 24,065, neither a distribution company, nor any of its controlled companies or its controlling company, can be the owner or majority shareholder or the controlling company of a transmission company; and
·	Under Section 9 of Decree No. 1398/92, a distribution company cannot own generation units. However, the shareholders of the electricity distributor may own generation units, either directly or through any other entity created with the purpose of owning or controlling generation units.

Definition of Control

The term “control” referred to in Section 31 of the Regulatory Framework Law (which establishes vertical restrictions) is not defined in such law. Section 33 of the Argentine Corporations Law states that “companies are considered as controlled by others when the holding company, either directly or through another company: (1) holds an interest, under any circumstance, that grants the necessary votes to control the corporate will in board meetings or ordinary shareholders’ meetings; or (2) exercises a dominant influence as a consequence of holding shares, quotas or equity interest or due to special linkage between the companies.” We cannot assure you, however, that the electricity regulators will apply this standard of control in implementing the restrictions described above.

Horizontal Restrictions

In addition to the vertical restrictions described above, distribution and transmission companies are subject to horizontal restrictions, as described below.

Transmitters

·	According to Section 32 of Law No. 24,065, two or more transmission companies can merge or be part of the same economic group only if they obtain an express approval from the ENRE. Such approval is also necessary when a transmission company intends to acquire shares of another electricity transmission company;
·	Pursuant to the concession agreements that govern the services rendered by private companies operating transmission lines above 132 kW and below 140 kW, the service is rendered by the concessionaire on an exclusive basis over certain areas indicated in the concession agreement; and
·	Pursuant to the concession agreements that govern the services rendered by the private company operating the high-tension transmission services equal to or higher than 220 KW, the company must render the service on an exclusive basis and is entitled to render the service throughout Argentina, without territorial limitations.

Distributors

·	Two or more distribution companies can merge or be part of the same economic group only if they obtain an express approval from the ENRE. Such approval is necessary when a distribution company intends to acquire shares of another electricity transmission or distribution company; and
·	Pursuant to the concession agreements that govern the services rendered by private companies operating distribution networks, the service is rendered by the concessionaire on an exclusive basis over certain areas indicated in the concession agreement.

2001 Economic Crisis

At the end of 2001 and beginning of 2002, Argentina experienced an unprecedented crisis that virtually paralyzed the country’s economy through most of 2002 and led to radical changes in government policies. See “Item 5. Operating and Financial Review and Prospects—Factors Affecting Our Results of Operations—Argentine Economic Conditions”. The crisis and the Argentine Government’s policies during this period severely affected the electricity sector.

The Argentine Government has repeatedly intervened in and modified the rules of the WEM since 2002 in an effort to address the electricity crisis generated by the economic crisis. These modifications include the establishment of caps on the prices paid by distributors for electricity power purchases and the requirement that all prices charged by generators be calculated based on the price of natural gas (also regulated by the Argentine Government) regardless of the fuel actually used in generation activities. These modifications have created a huge structural deficit in the operation of the WEM. The Argentine Government has made some attempts to correct these problems, including proposing new rules to structure the WEM in December 2004 and creating a special fund to finance infrastructure improvements in the energy sector in April 2006, but little progress has been made in advancing a system-wide solution to the problems confronting Argentina’s electricity sector.

In September 2006, the former SE issued Resolution No. 1,281/06 in an effort to respond to the sustained increase in energy demand following Argentina’s economic recovery after the crisis. This resolution sought to create incentives for energy generation plants in order to meet increasing energy needs. The resolution’s principal objective was to ensure that energy available in the market was used primarily to service residential users and those industrial and commercial users whose energy demand was at or below 300 kW and who lacked access to other viable energy alternatives. This resolution helped us to mitigate the risk of energy shortages due to a lack of electricity generation. See “—Business Overview—Our obligations.”

In 2009, the Argentine Government completed the construction and began the operation of two new 800 MW combined cycle generators constructed as part of its effort to increase energy supply. The costs of construction were financed with net revenues of generators derived from energy sales in the spot market and through specific charges from CAMMESA to large users. These funds had been deposited in the Fund for Investments Required to Increase Electricity Supply in the Wholesale Electricity Market(Fondo de Inversiones Necesarias que Permitan Incrementar la Oferta de Energía Eléctrica en el Mercado Eléctrico Mayorista, or FONINVEMEM).

Regulatory Authorities

The principal regulatory authorities responsible for the Argentine electricity industry are:

(1) the Secretaría de Energía (the “SE”);

(2) the ENRE; and

(3) CAMMESA.

The SE advises the Argentine Government on matters related to the electricity sector and is responsible for the application of the policies concerning the Argentine electricity industry. See “Item. 3. Key Information—Risk Factors—Risks Relating to Our Business—Failure or delay to negotiate further improvements to our tariff structure, including increases in our distribution margin, and/or to have our tariff adjusted to reflect increases in our distribution costs in a timely manner or at all, has affected our capacity to perform our commercial obligations and could also have a material adverse effect on our capacity to perform our financial obligations.”

The ENRE is an autonomous agency created by the Regulatory Framework Law. The ENRE has a variety of regulatory and jurisdictional powers, including, among others:

·	enforcement of compliance with the Regulatory Framework Law and related regulations;
·	control of the delivery of electric services and enforcement of compliance with the terms of concessions;
·	adoption of rules applicable to generators, transmitters, distributors, electricity users and other related parties concerning safety, technical procedures, measurement and billing of electricity consumption, interruption and reconnection of supplies, third-party access to real estate used in the electricity industry and quality of services offered;

·	prevention of anticompetitive, monopolistic and discriminatory conduct between participants in the electricity industry;
·	imposition of penalties for violations of concessions or other related regulations; and
·	arbitration of conflicts between electricity sector participants.

Under Law No. 24,065, the ENRE is managed by a five-member board of directors appointed by the Executive Branch of the Argentine Government. Two of these five members are nominated by the Consejo Federal de la Energía Eléctrica (Federal Council on Electricity, or “CFEE”). The CFEE is funded with a percentage of revenues collected by CAMMESA for each MWh sold in the market. Sixty percent of the funds received by the CFEE are reserved for the Fondo Subsidiario para Compensaciones Regionales de Tarifas a Usuarios Finales (Regional Tariff Subsidy Fund for End Users), from which the CFEE makes distributions to provinces that have met certain specified tariff provisions. The remaining forty percent is used for investments related to the development of electrical services in the Argentine provinces.

On December 22, 2015, through Decree No 231/15 the ME&M was created, as a result of the rise in hierarchy of the old SE, which had been part of the Ministry of Federal Planning, Public Investment and Services of the Nation, with the objective of elaborating, proposing and executing the national energy policy. On March 5, 2018, through Decree No 174/18 the structure of the ME&M was modified, amongst other offices of the Argentine Government. The older structure of the ME&M, created through Decree No 231/15, comprised four secretaries and fourteen undersecretaries, whilst the new structure was reduced to three secretaries and ten undersecretaries. However, on September 6, 2018, through Decree No. 801/18, the Argentine Government strategically reorganized the ministries, dissolving the ME&M and transforming it into the SEE, which remains within the orbit of control of the Ministry of Finance.

On December 19, 2019, the Executive Branch issued Decree No. 50/19 by means of which it approved the new organizational chart of the national government. According to this decree, the Secretariat of Energy is now part of the Ministry of Production Development, which is in charge of elaborating, proposing and executing the national energy policy.

Although CAMMESA is not a state-owned company, it usually receives funds from the Argentine Government, has a public purpose and makes decisions pursuant to SEE instructions.

CAMMESA is responsible for:

·	managing the SADI to the Regulatory Framework Law and related regulations, which includes:
·	determining technical and economic dispatch of electricity (i.e., schedule of production for all generating units on a power system to match production with demand) in the SADI;
·	maximizing the system’s security and the quality of electricity supplied;
·	minimizing wholesale prices in the spot market;
·	planning energy capacity needs and optimizing energy use pursuant to the rules from time to time established by the SE,
·	monitoring the operation of the term market and administering the technical dispatch of electricity pursuant to any agreements entered into in such market;
·	acting as agent of the various WEM participants;
·	purchasing or selling electricity from or to other countries by performing the relevant import/export operations;
·	providing consulting and other services related to these activities;
·	supplying fuel pursuant to Resolution No. 95/13 of the former SE, which includes the management, acquisition, nationalization, control, reception, storage and distribution of liquid fuels to Generation Centrals through marine, river and land transportation;
·	administrating the expansion of gas pipelines associated to natural gas supply to the new thermal centrals under construction;
·	managing the availability of the generation system, formalizing, controlling and supervising the works involved with supply commitment contracts. Implementation of the maintenance plans for the thermal system;
·	implementing the increase in capacity of the central storage;
·	incorporating Biodiesel to the electricity generation matrix; and
·	developing related activities pursuant to the execution of new generation infrastructure and transport, managing the trust contracts for the new thermal and nuclear centrals, especially for non-conventional sources of energy or those works within the National Hydraulic Works Program.

The operating costs of CAMMESA are covered by mandatory contributions made by WEM participants. CAMMESA’s annual budget is subject to a mandatory cap equivalent to 0.85% of the aggregate amount of transactions in the WEM projected for that year.

Pursuant to Law No. 27,467, which enacted the 2019 Federal Budget of Expenditures and Resources, the Executive Branch was instructed to promote such actions that may be necessary in order for the electricity distribution companies Edenor and Edesur to become subject to the joint jurisdiction of the Province of Buenos Aires as of and the City of Buenos Aires on January 1st, 2019.

On February 28, 2019, the Federal Government, the Province of Buenos Aires and the City of Buenos Aires entered into an agreement to initiate the process of transferring the public service of electricity distribution, duly awarded under the Concession Agreement by the Federal Government to Edenor, from the jurisdiction of the Argentine Government to the joint jurisdiction of the Province of Buenos Aires and the City of Buenos Aires, with the latter two jointly assuming the capacity as grantors of the concession of the service. The Province of Buenos Aires and the City of Buenos Aires agreed to set up a new bipartite agency in charge of the regulation and control of the distribution service, and the Federal Government agreed to take the necessary steps and carry out the necessary administrative procedures to provide a solution to the pending claims with both distribution companies.

In the framework of such agreement, on May 9, 2019, the Federal Government, the City of Buenos Aires and the Province of Buenos Aires entered into the Transfer Agreement, pursuant to which the City of Buenos Aires and the Province of Buenos Aires jointly assume, as from the date of effectiveness, the regulation, control and the capacity as grantor over the distribution service granted to Edenor under the Concession Agreement]. Furthermore, it is provided that (i) the Concession Agreement and also the national regulations issued by both the Energy Secretariat and the ENRE will remain in full force and effect until the effective date of the transfer occurs pursuant to the applicable regulatory framework; and (ii) that the pledge of the Class “A” shares, duly pledged as collateral to secure the performance of the obligations assumed by the holder of the concession and/or the majority shareholders under the Concession Agreement, is assigned on an undivided basis by the Federal Government to the City of Buenos Aires and the Province of Buenos Aires.

Further, with the enactment of the Productive Reactivation Law and the suspension of the transfer of the jurisdiction, the ENRE retained its jurisdiction over the public service of electricity distribution during the term of the emergency as set forth in such law.

Finally, in the framework of the Productive Reactivation Law, the Federal Executive Power was authorized to assume the administrative control of the ENRE and the ENARGAS for a term of one year and, consequently, on March 16, 2020, by means of Decree N° 277/20, the Executive Power intervened the ENRE until December 31, 2020.

The Wholesale Electricity Market

Overview

The former SE established the WEM in August 1991 to allow electricity generators, distributors and other agents to buy and sell electricity in spot transactions or under long-term supply contracts at prices determined by the forces of supply and demand.

The WEM consists of:

·	a term market in which generators, distributors and large users enter into long-term agreements on quantities, prices and conditions. Since March 2013, pursuant to Resolution No. 95/13 of the former SE, all large users have to buy their backup energy from CAMMESA seasonally;
·	a spot market, in which prices are established on an hourly basis as a function of economic production costs, represented by the short-term marginal cost of production and demand; and
·	a stabilization fund, managed by CAMMESA, which absorbs the differences between purchases by distributors at seasonal prices and payments to generators for energy sales at the spot price.

Operation of the Wholesale Electricity Market

The operation of the WEM is administered by CAMMESA, which was created in July 1992 by the Argentine Government and currently owns 20% of CAMMESA’s capital stock. The remaining 80% is owned by various associations that represent WEM participants, including generators, transmitters, distributors and large users.

The following chart shows the relationships among the various actors in the WEM:

Wholesale Electricity Market Participants

The main participants in the WEM are generation, transmission and distribution companies. Large users and traders also participate in the WEM but to a lesser extent.

Generators

According to a recent report issued by CAMMESA, as of December 31, 2018, there were more than a hundred generation companies, afewer auto-generation companies, and just a few co-generation companies, most of which operate more than one generation plant in Argentina. As of December 31, 2019, Argentina’s installed power capacity was 39,704 MW, 62% of which derived from thermal generation, 27% from hydraulic generation, 4.4% from nuclear generation and 6.6% from non-conventional sources of energy.Private generators participate in CAMMESA through the Asociación de Generadores de Energía Eléctrica de la República Argentina (Argentine Association of Electric Power Generators, or AGEERA), which is entitled to appoint two acting and two alternate directors of CAMMESA.

On December 27, 2017, Law No. 27,424 was enacted and is related to the generation of electric power from renewable energy sources. Such law provides the legal and contractual conditions for the generation of renewable energy by the users of the distribution network for self-consumption and eventual injection of excess electricity into the grid. Additionally, the law created a public fiduciary fund, called Fund for the Distributed Generation of Renewable Energy (“FODIS”), which aims to finance the implementation of distributed generation systems of renewable energy. Also, the law created the promotion regime for the National Manufacturing Systems, Equipment and Supplies for the Distributed Generation of Renewable Energy (“FANSIGED”), whose main activities comprise research, design, development, investment in capital goods, production, certification and installation services for the distributed generation of energy from renewable sources.

Transmitters

Electricity is transmitted from power generation facilities to distributors through high voltage power transmission systems. Transmitters do not engage in purchases or sales of power. Transmission services are governed by the Regulatory Framework Law and related regulations promulgated by the ME&M.

In Argentina, transmission is carried at 500 kV, 300 kV, 220 kV and 132 kV through SADI. The SADI consists primarily of overhead lines and transformation stations (i.e., assemblies of equipment through which electricity delivered through transmission circuits passes and is converted into voltages suitable for use by end users) and covers approximately 90% of the country. The majority of the SADI, including almost all of the 500 kV transmission lines, has been privatized and is owned by Transener S.A., which is indirectly co-controlled by Pampa Energía, our controlling shareholder and the largest integrated electricity company in Argentina (See “Item 7. Major Shareholders and Related Party Transactions—Parent Company Merger Process”). Regional transmission companies, most of which have been privatized, own the remaining portion of the SADI. Supply points link the SADI to the distribution systems, and there are interconnections between the transmission systems of Argentina, Brazil, Uruguay and Paraguay allowing for the import and export of electricity from one system to another.

Transmission companies also participate in CAMMESA by appointing two acting and two alternate directors through the Argentine Association of Electric Power Transmitters(Asociación de Transportistas de Energía Eléctrica de la República Argentina, or “ATEERA”).

In 2017, pursuant to Resolution No. 1,085/17, the SEE significantly modified the allocation of costs of the HV and extra high voltage transmission systems. The changes implemented, applicable as from December 1, 2017 are: (1) WEM generators no longer pay for the use of the transmission networks, except for the connection equipment entirely destined for each generator; and (2) the total cost of each transmitter is distributed among the users in its network, in proportion to their demand for energy, no longer applying the calculation methodology based on equipment use.

Distributors

Each distributor supplies electricity to consumers and operates the related distribution network in a specified geographic area pursuant to a concession. Each concession establishes, among other things, the concession area, the quality of service required, the tariffs paid by consumers for the distribution service and an obligation to satisfy demand. The ENRE monitors compliance by federal distributors, including us and Edesur with the provisions of the respective concessions and with the Regulatory Framework Law. In turn, provincial regulatory agencies monitor compliance by local distributors with their respective concessions and with local regulatory frameworks.

Distributors participate in CAMMESA by appointing two acting and two alternate directors through the Argentine Association of Electric Power Distributors(Asociación de Distribuidores de Energía Eléctrica de la República Argentina, or ADEERA).

We and Edesur are the largest distribution companies and, together with Edelap, originally comprised SEGBA, which was divided into three distribution companies at the time of its privatization in 1992.

Large Users

The WEM classifies large users of energy into three categories: Major Large Users(Grandes Usuarios Mayores, or GUMAs), Minor Large Users(Grandes Usuarios Menores, or GUMEs) and Particular Large Users (Grandes Usuarios Particulares, or GUPAs).

Each of these categories of users has different requirements with respect to purchases of their energy demand. For example, GUMAs are required to purchase 50% of their demand through supply contracts and the remainder in the spot market, while GUMEs and GUPAs are required to purchase all of their demand through supply contracts.

Large users participate in CAMMESA by appointing two acting and two alternate directors through the Argentine Association of Electric Power Large Users(Asociación de Grandes Usuarios de Energía Eléctrica de la República Argentina, or AGUEERA).

Spot Market

Spot Prices

The emergency regulations enacted after the Argentine crisis in 2001 and 2002 had a significant impact on energy prices. Among the measures implemented pursuant to the emergency regulations were the pesification of prices in the WEM, known as the spot market, and the requirement that all spot prices be calculated based on the price of natural gas, even in circumstances where alternative fuel such as diesel is purchased to meet demand due to the lack of supply of natural gas.

Prior to the crisis, energy prices in the spot market were set by CAMMESA, which determined the price charged by generators for energy sold in the spot market of the WEM on an hourly basis. The spot price reflected supply and demand in the WEM at any given time, which CAMMESA determined using different supply and demand scenarios that dispatched the optimum amount of available supply, taking into account the restrictions of the transmission grid, in such a way as to meet demand requirements while seeking to minimize the production cost and the cost associated with reducing risk of system failure.

The spot price set by CAMMESA compensated generators according to the cost of the last unit to be dispatched for the next unit as measured at the Ezeiza 500 kV substation, which is the system’s load center and is in close proximity of the City of Buenos Aires. Dispatch order was determined by plant efficiency and the marginal cost of providing energy. In determining the spot price, CAMMESA also would consider the different costs incurred by generators not in the vicinity of Buenos Aires.

In addition to energy payments for actual output at the prevailing spot market prices, generators would receive compensation for capacity placed at the disposal of the spot market, including stand-by capacity, additional stand-by capacity (for system capacity shortages) and ancillary services (such as frequency regulation and voltage control). Capacity payments were originally established and set in U.S. Dollars to allow generators to cover their foreign‑denominated costs that were not covered by the spot price. However, in 2002, the Argentine Government set capacity payments in reference to the Peso thereby limiting the purpose for which capacity payments were established.

Seasonal Prices

The emergency regulations also made significant changes to the seasonal prices charged to distributors in the WEM, including the implementation of a pricing ladder organized by level of user consumption (which varies depending on the category of users) charged by CAMMESA to distributors at a price significantly below the spot price charged by generators. Prior to the implementation of the emergency regulations, seasonal prices were determined by CAMMESA based on an estimate of the weighted average spot price that would be paid by the next generator that would come on-line to satisfy a theoretical increase in demand (marginal cost), as well as the costs associated with the failure of the system and several other factors. CAMMESA would use a seasonal database and optimization models in determining the seasonal prices and would consider both anticipated energy supplies and demand, including, expected availability of generating capacity, committed imports and exports of electricity and the requirements of distributors and large users.

In November 2012, pursuant to Resolution No. 2,016/12 of the former SE and in accordance with the Summer Seasonal Program approved for the period November 2012-April 2013, the seasonal price format was modified, concluding in a single purchase price without considering any demand nor time segmentation and taking into account the structure of the demand as of October 2012 as the base. Subsequently, the former SE adopted Resolution No. 408/13, which maintained both the single price and the criteria for raising subsidies during the winter season.

During the winter season 2014, Resolution No. 2,016/12 was applied without any price reduction andresidential users with consumption levels above 1,000 KWh did not receive subsidies equivalent to those received in 2013.

On January 25, 2016, the ME&M issued Resolution No. 6/16, approving the seasonal WEM prices for each category of user, pursuant to the Regulatory Framework Law, for the period of February 2016 through April 2016, in force through January 2017. These WEM prices resulted in the elimination of certain energy subsidies and a substantial increase in electricity rates for users. Such resolution also contemplated a differentiated tariff for residential users who achieved energy consumption savings between 10% and 20%, or greater than 20%, compared to the same period in the year 2015 (Stimulus Plan), and a social tariff for residential users who comply with certain consumption requirements, which includes a full exemption for monthly consumptions below or equal to 150 KWh and tariff benefits for users who exceed such consumption level but achieve a monthly consumption lower than that of the same period in the immediately preceding year.

Beginning in May 2016, we were notified by several courts of the Province of Buenos Aires of injunctions granted to individual and collective users against Resolution No. 6/16 and Resolution No. 1/16 issued by the ENRE (which authorized our new tariff schedule as from February 2016). Consequently, the then applicable tariff schedule, which includes the WEM prices established by Resolution No. 6/16, were not applied during certain periods in 2016 to the entire concerned area as a result of the injunctions issued in the above-mentioned case and to the districts of “Pilar” and “La Matanza” where provisional remedies were in effect until October 24 and November 11, 2016, respectively, when they expired. Therefore, as of those dates, no provisional remedy has been in effect and the new tariff scheme has been applied to all users.

On February 1, 2017, the SEE published Resolution No 20-E/17, pursuant to which it approved the Summer Seasonal Schedule for the WEM corresponding to the period held between February 1 and April 30, 2017.

In this regard, the SEE established the power and electricity reference prices for the different categories of users, which has been in force since March 1, 2017, and recognized a discount for the reference prices, exclusively for the month of February 2017. The SEE also ratified the social tariff determined by Resolution No. 6/16, and included the category of electricity dependent users, which establishes a full exemption for monthly consumptions below or equal to 600 KWh and tariff benefits for those users who exceed such consumption level but achieve a monthly consumption lower than that of the same period in the immediately preceding year.

On November 30, 2017, through Resolution No. 1,085-E/17, the SEE established a new methodology for the allocation of high-voltage transportation costs, which will be evenly distributed among all the energy demand of the WEM with a uniform rate, assigning them to the users accordingly to their energy demand.

As of December 1, 2017, in accordance with ME&M Resolution No. 1091/17, the new stabilized price of energy and the power output reference price were defined. Additionally, the new stabilized price of transport was settled, which became more significant in the purchase price of energy.

On December 27, 2018, Resolution No. 366/18 issued by the SGE approved the Summer Seasonal Schedule for the WEM submitted by CAMMESA, which determined new prices for power capacity, energy and transmission for the period from February 2019 through October 2019. Furthermore, the social tariff and savings bonuses for the residential tariff were eliminated, as beneficiaries have been transferred to the provincial jurisdictions. As of the date of issuance of this document, the Province of Buenos Aires and the City of Buenos Aires are complying with the payment of the social rate on a regular basis.

On January 31, 2019, pursuant to ENRE Resolution No. 25/19 the ENRE approved (under the terms of ENRE Resolution No 366/2018) the values of the Company’s Electricity Rate Schedule, effective as from February 1, 2019, and informed the value of the average electricity rate as from February 1, 2019 under the terms of Energy Government Secretariat Resolution No. 366/2018, which modified the prices at which distributors acquire energy in the MEM.

Furthermore, pursuant to Resolution No. 27/19, the ENRE approvedthe CPD value of February 2019 together with the stimulus factor, which application was deferred until March 2019. Additionally, such Resolution determined the value to be applied for the 36 remaining installments resulting from the gradual application system established in ENRE Resolution No.63/2017, and provided as well that the 50% of the CPD that should have been applied in August 2019, will be recovered in 6 CPD variation-adjusted installments.

Stabilization Fund

The stabilization fund, managed by CAMMESA, absorbs the difference between purchases by distributors at seasonal prices and payments to generators for energy sales at the spot price. When the spot price is lower than the seasonal price, the stabilization fund increases, and when the spot price is higher than the seasonal price, the stabilization fund decreases. The outstanding balance of this fund at any given time reflects the accumulation of differences between the seasonal price and the hourly energy price in the spot market. The stabilization fund is required to maintain a minimum amount to cover payments to generators if prices in the spot market during any relevant quarter exceed the seasonal price.

Billing of all WEM transactions is performed monthly through CAMMESA, which acts as the clearing agent for all purchases between participants in the market. Payments are made approximately 40 days after the end of each month.

The stabilization fund was adversely affected as a result of the modifications to the spot price and the seasonal price made by the emergency regulations, pursuant to which seasonal prices were set below spot prices resulting in large deficits in the stabilization fund. As of December 31, 2019, the stabilization fund balance was approximately Ps.230 billion, resulting from the stabilization fund plus the over expenses of dispatch net of the Argentine treasury contributions. However, if all the funds and accounts of energy and power are considered (including the additional energy, fuel over expenses, quality supply, surplus demand pursuant to Resolution No. 1,281/06 of the SE, WEM, over expense contracts, etc.), this balance is decreased to approximately Ps.226 billion. In this regard, the deficit has been financed by the Argentine Government through nonrefundable loans to CAMMESA over a ten year period, and the same methodology continues to be applied, although the deficit tends to be reduced as a result of the policies implemented by the ME&M.

Term Market

Generators are able to enter into agreements in the term market to supply energy and capacity to distributors and large users. Distributors are able to purchase energy through agreements in the term market instead of purchasing energy in the spot market. Term agreements typically stipulate a price based on the spot price plus a margin. Prices in the term market have at times been lower than the seasonal price that distributors are required to pay in the spot market. However, as a result of the emergency regulations, spot prices in the term market are currently higher than seasonal prices, particularly with respect to residential tariffs, making it unattractive for distributors to purchase energy under term contracts while prices remain at their current levels.

As from March 2013, pursuant to the SE Resolution No. 95/13, all large users are required to purchase their backup energy from CAMMESA at any relevant contractual maturity date.

According to Law No. 27,191, users whose average demand in the previous year of each transaction, is less than or equal to 300 kW, must meet the applicable percentages of renewable energy participation imposed by such law through either of the following two mechanisms: joint purchases or supply contracts.

During 2017, pursuant to Resolution No 281-E/17 (amended by Disposition 1-E/18 issued by the Susbsecretaría de Energías Renovables) the ME&M created the Term Market Regime for Electric Power from Renewable Sources, which established the percentages of renewable energy that large users are obliged to consume within their demand of energy. The resolution also determined the commercialization and administration charges for large users that opt for the joint purchase of renewable energy that CAMMESA commercializes. Additionally, large users can agree to supply contracts directly with the generators, without incurring charges for joint purchases.

Plus Energy

In September 2006, the former SE issued Resolution No. 1,281/06 in an effort to respond to the sustained increase in energy demand following Argentina’s economic recovery after the crisis. This resolution seeks to create incentives for energy generation plants in order to meet increasing energy needs. The resolution’s principal objective is to ensure that energy available in the market is used primarily to service residential users and industrial and commercial users whose energy demand is at or below 300 kW and who do not have access to other viable energy alternatives. To achieve this, the resolution provides that:

large users in the WEM and large users of distribution companies (in both cases whose energy demand is above 300 kilowatts), will be authorized to secure energy supply up to their “base demand” (equal to their demand in 2005) by entering into term contracts; and

large users in the WEM and large users of distribution companies (in both cases whose energy demand is above 300 kilowatts) must satisfy any consumption in excess of their base demand with energy from the Plus Energy system at unregulated market prices. The Plus Energy system consists in the supply of additional energy generation from new generation and/or generating agents, co-generators or auto-generators that are not agents of the electricity market or who as of the date of the resolution were not part of the WEM. Large users in the WEM and large users of distribution companies can also enter into contracts directly with these new generators or purchase energy at unregulated market prices through CAMMESA.

Only the new generation facilities (which include generators that were not connected to the SADI as of September 5, 2006) and new generation capacity expansions in respect of existing capacity as of such date are entitled to sell electricity under thePlus Energy system.

The resolution also established the price large users are required to pay for excess demand, if not previously contracted underPlus Energy, which is equal to the generation cost of the last generation unit transmitted to supply the incremental demand for electricity at any given time. The SE established certain temporary price caps to be paid by large users for any excess demand which as of the date of this annual report were Ps.550 per MWh for GUDIs and Ps.450 per MWh for GUMEs and GUMAs.

These prices have been updated as follows:

·	after August 2011, the median incremental charge for excess demand was set at Ps./MWh for GUMAs and GUMEs and 455 Ps./MWh for GUDIs;
·	after December 2011, the median incremental charge for excess demand for those who are not subsidized was set at 360 Ps./MWh;
·	pursuant to the former SE Resolution No. 95/13 from March 22, 2013, as opposed to the backup contracts where a unique energy supplier is authorized by CAMMESA, thePlus Energy contracts are available to the large users and generators previously authorized by the Argentine National Planning, Public Investment and Services Ministry. The users under the GUDI category, whoseEnergy Plus contracts mature, have the option of rehiringEnergy Plus, reclassifying themselves under the GUME category; or continue buying the total amount of their energy from the distributors, paying in case needed. Base Surplus Demand pursuant to Resolution SE No. 1,281/06;
·	as of March 13, 2015, the median incremental charge for excess demand was set at Ps./MWh for GUMAs and GUMEs and 550 Ps./MWh for GUDIs; and
·	based on the guidelines set forth in Resolution No. 6 of the ME&M, the median incremental charge for excess demand was set at 650 Ps./MWh for GUMAs and GUMES, while GUDIs stopped paying this charge.

ORGANIZATIONALSTRUCTURE

Edenor is a subsidiary of Pampa Energía, which is the largest independent integrated energycompany in Argentina.As of December 31, 2019,Pampa Energía and its subsidiaries were engaged in the generation, distribution and transmission of electricity in Argentina, oil and gas exploration and production, refining and distribution, petrochemicals and hydrocarbon commercialization and transportation in Argentina and, to a lesser extent, in Ecuador and Venezuela.

As of December 31, 2019:

·	the generation installed capacity reached approximately 4,751 MW, with a market share in Argentina of approximately 12%. In addition, Pampa Energía committed to develop projects that it expects will increase its installed capacity by 471 MW, for a total installed capacity of 5,222 MW;
·	the distribution of energy operations supplied electricity to approximately 3,1 million users throughout the northern region of the City of Buenos Aires and the Northwestern Greater Buenos Aires area, making us the largest electricity distribution company in Argentina;
·	the combined oil and gas production in Argentina where Pampa Energía averaged 48.2 thousand barrels of oil equivalent per day, considering continuing operations. Crude oil accounted for approximately 5.1 thousand barrels of oil equivalent per day, while natural gas accounted for approximately 238.4 million standard cubic feet per day, or 43.2 thousand barrels of oil equivalent per day based on a measure of conversion of 6,000 cubic feet of gas per barrel of oil equivalent;

·	the refining and distribution operations based in Argentina, where Pampa Energía has a 28.5% interest in Refinería del Norte S.A. (“Refinor”), which has a commercial network of 90 gas stations located in the Argentine Provinces of Tucumán, Salta, Santiago del Estero, La Rioja, Jujuy, Catamarca and Chaco; and
·	the petrochemicals operations were entirely based in Argentina, where Pampa Energía operated three high-complexity plants producing styrene, styrene butadiene rubber (“SBR”) and polystyrene, with a domestic market share ranging between 89% and 100%.

In addition, Pampa Energía holds interests in companies engaged in other businesses, including Transener (as defined below), which is engaged in electricity transmission and TGS (as defined below), which is engaged in gas transportation. For more information, see “Item 7. Major Shareholders and Related Party Transactions—Parent Company Merger Process.”

The following diagram presents our corporate structure as of the date of filing of this annual report:

Property, plant and equipment

Our main properties are transmission lines, substations and distribution networks, all of which are located in the northwestern part of the greater Buenos Aires metropolitan area and in the northern part of the City of Buenos Aires. Substantially all of our properties are held in concession to provide the electricity distribution service, which, by its nature, is considered to be an essential public service. In accordance with Argentine law and court precedents, assets which are necessary for the rendering of an essential public service are not subject to attachment or attachment in aid of execution.

The net book value of our property, plant and equipment as recorded on our financial statements was Ps. 101,298.4 million, Ps. 96,067.6 million and Ps. 87,741.4 million as of December 31, 2019, 2018 and 2017, respectively. For a description of our capital expenditures plan, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Edenor’s Capital Expenditures.”

The total value of property, plant and equipment transferred by SEGBA on September 1, 1992 was allocated to individual assets accounts on the basis of engineering studies conducted by the Company. The value of property, plant and equipment was determined based on the price effectively paid by Pampa for the acquisition of 51% of the Company’s capital stock. SEGBA neither prepared separate financial statements nor maintained financial information or records with respect to its distribution operations or the operations in which the assets transferred to Edenor were used. Accordingly, it was not possible to determine the historical cost of transferred assets. Additions subsequent to such date have been valued at acquisition cost, net of the related accumulated depreciation. Depreciation has been calculated by applying the straight-line method over the remaining useful life of the assets, which was determined on the basis of the above-mentioned engineering studies. Furthermore, in order to improve the disclosure of the account, the Company has made certain changes in the classification of property, plant and equipment based on each technical process. In accordance with the provisions of IAS 23, borrowing costs in relation to any given asset are to be capitalized when such asset is in the process of production, construction, assembly or completion, and such processes, due to their nature, take long periods of time; those processes are not interrupted; the period of production, construction, assembly or completion does not exceed the technically required period; the necessary activities to put the asset in condition to be used or sold are not substantially complete; and the asset is not in condition so as to be used in the production or startup of other assets, depending on the purpose pursued with its production, construction, assembly or completion. Subsequent costs (major maintenance and reconstruction costs) are either included in the value of the assets or recognized as a separate asset, only if it is probable that the future benefits associated with the assets will flow to the Company, being it possible as well that the costs of the assets may be measured reliably and the investment will improve the condition of the asset beyond its original state. The other maintenance and repair expenses are recognized in profit or loss in the year in which they are incurred. The total value of property, plant and equipment suffered the effects of the application of IAS 29, as discussed in our audited financial statements, included in Item 18 of this annual report and in the “Selected Financial Data,” included in Item 3; The non-monetary items carried at historical cost were restated using coefficients that reflect the variation recorded in the general level of prices from the date of acquisition or revaluation to the closing date of the reporting period. Depreciation charges of property, plant and equipment and amortization charges of intangible assets recognized in profit or loss for the period, as well as any other consumption of non-monetary assets were determined on the basis of the new restated amounts. See “Item 5. Operating and Financial Review and Prospects—Factors Affecting Our Results of Operations—Tariffs—Distribution Margin or Value‑Added for Distribution (VAD)—Integral Tariff Revision, or (RTI).”

Termination of agreement on real estate property

In November 2015, the Company entered into an agreement with RDSA for the purchase and construction of real estate property for a total of U.S.$46 million (equivalent to Ps.439.3 million according to the effective exchange rate at the time of execution of the purchase agreement). The Company purchased the real estate property to centralize its functions, reduce rental costs and to mitigate the risk of potential rent increases. In addition, the Company obtained a surety bond from Aseguradores de Cauciones for U.S.$46 million, plus the private banks’ Badlar rate in dollars + 2%, to guarantee payment of liquidated damages in the event of the seller’s default.

Pursuant to the agreement, RDSA was obligated to deliver the property on June 1, 2018, and failed to perform. As a result, the Company declared the RDSA in breach, notified Aseguradores de Cauciones of such breach and subsequently collected U.S.$502.8 thousand in fines accrued during the term of the agreement and duly deposited as bond by the seller for failing to meet the construction project milestones of the agreement.

With regards to the legal actions brought by the Company against RDSA and the insurance company, on September 30, 2019, the Company entered into a settlement agreement pursuant to which the insurance company will pay to the Company a sole compensation of U.S.$15 million and assign it the insurer’s subrogation right for the amount paid to RDSA.

As of December 31, 2019, the Company has collected U.S.$14 million. The remaining balance will be paid in 6 quarterly installments, the first of which was due on April 21, 2020. As of the date of this annual report we have not received payment.

Furthermore, the claim filed by the Company with the Arbitral Tribunal of the Buenos Aires Stock Exchange against RDSA in order for the latter to refund the price paid for the undelivered real property was suspended so that the claim could be allowed in RDSA’s insolvency proceeding. Such claim was allowed by the court hearing the case for the sum of Ps.2,125.9 million. Additionally, an ancillaryproceeding for review of the amount rejected by the court was initiated for an additional amount of Ps.895.7 million.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The following discussion should be read in conjunction with our audited financial statements as of and for the years ended December 31, 2019, 2018 and 2017, included in Item 18 of this annual report and the “Selected Financial Data,” included in Item 3 herein. Our financial statements have been prepared in accordance with IFRS as issued by the IASB. See “Item 3. Key Information—Selected Financial Data.”

The Company has recorded negative working capital in each of the last four years. This situation was not reversed after the application as from February 1, 2017 of the new tariff arising from the RTI, mainly due to the constant increase of our operating costs, necessary to maintain the level of service, the Argentine economy’s inflationary environment, and the sustained recession since mid-2018, which has resulted in lower revenues, the extension of collection periods and the constant increase in levels of energy theft.

Despite such situation, in general terms, the quality of the electricity distribution service has been improved, both in duration and in interruption frequency. In view of the continuous increase of the costs associated with the provision of the service, as well as the need for additional investments to meet greater seasonal demand, the Company has taken a series of measures aimed at mitigating the negative effects on its financial structure and minimizing the impact on (i) the sources of employment, (ii) the execution of the investment plan, and (iii) the performance of essential operation, maintenance and improvement-related works that are necessary to maintain the provision of the public service pursuant to the Concession Agreement, in a satisfactory manner in terms of quality and safety.

Taking into consideration that the Company operates in a complex economic context, the main variables have recently been subject to a high degree of volatility, as evidenced, among other, by the following facts:

·	1.7% year-on-year decrease of GDP in the third quarter of 2019;
·	53.77% cumulative inflation rate between January 1, 2019 and December 31, 2019;
·	Significant depreciation of the Argentine peso as from August 2019, giving rise to an unexpected withdrawal of dollar-denominated deposits from the financial system;
·	Decrease of Central Bank’s reserves;
·	Decrease in the reference interest rate in December 2019; such rate is still at high levels as of the date of this annual report.

In view of this economic situation, the Federal Government decided to implement certain measures, including the following:

·	Setting specific time limits for the inflow and settlement of export proceeds;
·	BCRA’s prior authorization required to companies for the purchase of external assets;
·	Prior authorization for imports of any kind of goods and services;
·	30% tax on foreign currency-denominated transactions;
·	Deferral of the payment of certain government debt instruments;
·	Fuel price control;
·	Negative real interest rate; and
·	Rate schedules maintenance agreement.

Additionally, on December 23, 2019, the Federal Executive Power enacted the Productive Reactivation Law, which has a direct impact on the Company’s financial condition given that, as a consequence of such law, tariffs of electricity were frozen for 180 days since its effectiveness.

Considering that the adoption of necessary measures to reverse the negative trend depends on the occurrence of certain events that are not under the Company’s control, the Board of Directors has raised substantial doubt about Edenor’s ability to continue as a going concern, which may result in the Company being obliged to defer certain payment obligations or unable to meet expectations for salary increases or the increases recorded in third-party costs.

The financial statements of the Company for the fiscal year ended on December 31, 2019 have been prepared assuming that the Company will continue to operate as a going concern and do not include the effects of the adjustments or reclassifications that might result from the outcome of the uncertainties referred to above.

Novel Coronavirus (COVID-19)

The ongoing COVID-19 pandemic is having a significant impact on the global economy and thefinancial markets, including in Argentina, and consequently it may adversely affect our business, results of operations and cash flows. As conditions are recent, uncertain and changing rapidly, it is difficult to predict the full extent of the impact that the pandemic will have on the Company. The recent outbreak of COVID-19, which has been declared by the World Health Organization to be a “public health emergency of international concern” has rapidly spread across the globe and is impacting worldwide economic activity. Countries around the world, including Argentina, have adopted extraordinary measures to stem the spread of COVID-19, including the use of quarantine, screening at airports and other transport hubs, travel restrictions, suspension of visas, nation-wide lockdowns, closing of public and private institutions and extension of holidays, among many others. Depending on how the spread of the virus evolves, governments may extend these measures for longer periods.

As a result of COVID-19 pandemic, our cash flows and profits may be affected since (i) our earnings may be reduced as our commercial offices must remain closed until the end of the quarantine and customers may face difficulties to pay tariffs, (ii) the demand from non-residential clients is expected to be lower, which may not be offset by the demand of residential customers, (iii) our chain of payments is expected to be interrupted across our operations, (iv) we may not be able to comply with the investment plan as required by ENRE, which may lead to fines and penalties and (v) impairment of long-lived assets. For more information see “Item 3. Key Information—Risk Factors—Developments relating to the novel coronavirus may have a material adverse impact on our business operations, financial condition or results of operations.” and “Item 4. Information on the Company—Recent Developments in Argentina – Measures Designed to Address the COVID-19 Outbreak.”

Overview of IAS 29

Pursuant to IAS 29, the financial statements of an entity whose functional currency is that of a highly inflationary economy should be measured in terms of the measuring unit current as of the date of the financial statements. All the amounts included in the statement of financial position which are not stated in terms of the measuring unit current as of the date of the financial statements should be adjusted applying the general price index. All items in the statement of income should be stated in terms of the measuring unit current as of the date of the financial statements, applying the changes in the general price index occurred from the date on which the revenues and expenses were originally recognized in the financial statements.

Adjustment for inflation in the initial balances has been calculated considering the indexes reported by the FACPCE based on the price indexes published by the INDEC.

The principal inflation adjustment procedures are the following:

·	Monetary assets and liabilities that are recorded in the current currency as of the balance sheet’s closing date are not restated because they are already stated in terms of the currency unit current as of the date of the financial statements.
·	Non-monetary assets and liabilities are recorded at cost as of the balance sheet date, and equity components are restated applying the relevant adjustment ratios.
·	All items in the statement of income are restated applying the relevant conversion factors.

·	The effect of inflation in the Company’s net monetary position is included in the statement of income under financial results, net, in the item “Inflation adjustment.”
·	Comparative figures have been adjusted for inflation following the procedure explained in the previous paragraphs, established in IAS 29.
·	Upon initially applying inflation adjustment, the equity accounts were restated as follows:
·	Capital was restated as from the date of subscription or the date of the most recent inflation adjustment for accounting purposes, whichever is later.
·	The resulting amount was included in the “Capital adjustment” account.
·	Other comprehensive income/(loss) was restated as from each accounting allocation.
·	The other reserves are restated by applying the variation of the general price index from the date of contribution, or from the moment they arose by any other means

Operating Results

We distribute electricity on an exclusive basis to the northwestern part of the greater Buenos Aires metropolitan area and the northern part of the City of Buenos Aires, comprising an area of 4,637 square kilometers, with an aggregate population of approximately eight million people. Pursuant to our concession, we have the exclusive right to distribute electricity to all users within our concession area, including to WEM participants. As of December 31, 2019, we had 3,119,279 users.

We serve two markets: the regulated market, which comprises users who are unable to purchase their electricity requirements directly through the WEM, and the unregulated market, which comprises large users that purchase their electricity requirements directly from generators in the WEM. The ENRE regulates the terms and conditions of our services and the tariffs we charge users in both the regulated and unregulated markets.

Factors Affecting Our Results of Operations

Our net sales consist mainly of net energy sales to users in our concession area. Our net energy sales reflect the tariffs we charge our users (which include our energy purchase costs). In addition, our net sales include connection and reconnection charges and leases of poles and other network equipment.

Regulatory changes impact our results of operations as they set tariffs paid to us for our services. The following ENRE resolutions, among others, have a direct impact on the tariffs we charge:

·	On January 31, 2017, the ENRE issued Resolution No. 63/17, pursuant to which it determined electricity rate schedules, the mechanism for costs review, the required quality levels and all other rights and obligations that are applicable to the Company as from February 1, 2017. On February 1, 2017, pursuant to Resolution No. 63/17 and as instructed by the ME&M, the ENRE limited VAD increases from the RTI process to a maximum of 42% vis-á-vis the prior VAD, with the VAD remainder being applied in November 2017 and February 2018
·	On November 30, 2017, the ENRE issued Resolution No. 603/17, pursuant to which it approved the CPD values, applicable as of December 1, 2017, and retroactively applied to consumption in August through November 2017, which was billed in two installments, of December 2017 and January 2018. In addition, the electricity rate schedule’s values to be applied as of December 1, 2017, were approved.
·	On January 31, 2018, the ENRE issued Resolution No. 33/18, pursuant to which it approved the CPD values for July 2017 through December 2017 of which 11.99% was applied to the 48 monthly installments established in ENRE Resolution No. 329/17 that had been deferred in 2017 and the electricity rate schedule to be applied to consumption as of February 1, 2018 became effective. In addition, such resolution notified the average electricity rate value which amounted to Ps.2.4627/KWh.

·	On July 31, 2018, the ENRE issued Resolution No. 208/18, pursuant to which it approved, the CPD for January 2018 through June 2018 of which 7.93% was applied as of August 1, 2018, and 6.51% in six consecutive monthly installments as of February 1, 2019. The CPD amounted to 15.85%. In addition, such resolution established a social tariff cap system and required discount values for users affected by deficiencies in the quality of the technical product and/or the quality of the technical and commercial service from 2018 to February 2019. Furthermore, Resolution No. 208/18 notified the average electricity rate value which amounted to Ps.2.9871/KWh.
·	On December 27, 2018, The SGE enacted Resolution No. 366/18, which repealed SEE Resolution 1,091/17, consequently eliminating the energy-savings discount for the residential tariff charged to users under the social tariff as from January 1, 2019. The social tariff discounts will be assumed by the Governments of the Province of Buenos Aires and the City of Buenos Aires in accordance with the provisions of the 2019 Federal Budget Law.
·	On January 31, 2019, the ENRE issued Resolution No. 25/19, which approved (under the terms of ENRE Resolution 366/2018) the values of the Company’s Electricity Rate Schedule, effective as from February 1, 2019, and informed the value of the average electricity rate as from February 1, 2019 under the terms of Energy Government Secretariat Resolution No. 366/2018, which modified the prices at which distributors acquire energy in the MEM. Furthermore, the ENRE issued Resolution No. 27/19 which approved the CPD value of February 2019 together with the stimulus factor, which application was deferred until March 2019. Additionally, such Resolution determined the value to be applied for the 36 remaining installments resulting from the gradual application system established in ENRE Resolution No. 63/2017, and provided as well that the 50% of the CPD that should have been applied in August 2019, will be recovered in 6 CPD variation-adjusted installments.

If, in the future, we are not able to recover the incremental cost increases and have them reflected in our tariffs, and/or there is a significant lag of time between when we incur the incremental costs and when we receive increased income, we may be unable to comply with our financial and commercial obligations, suffer liquidity shortfalls and need to restructure our debt to ease our financial condition, any of which, individually or in the aggregate, would have a material adverse effect on our business and results of operations and may cause the value of our ADSs to decline. See “Item 5. Operating and Financial Review and Prospects—Factors Affecting our Results of Operations—Tariffs” and “Item 3. Key Information—Risk factors—Risks Relating to Our Business—Failure or delay to negotiate further improvements to our tariff structure, including increases in our distribution margin, and/or to have our tariffs adjusted to reflect increases in our distribution costs in a timely manner or at all, has affected our capacity to perform our commercial obligations and could also have a material adverse effect on our capacity to perform our financial obligations.”

The following table sets forth the composition of our net sales for the periods indicated:

	Year ended December 31
	2019	2018	2017	2016
	(Figures in millions)
Sales of Electricity	89,573.1	85,634.0	60,477.3	39,329.7
Right of use of poles	283.5	292.7	326.4	328.2
Connection Charges	60.9	78.6	75.9	47.5
Reconnection Charges	26.3	34.6	17.7	8.4
Net sales	89,943.8	86,039.9	60,897.3	39,713.8

The following tables show Edenor’s energy sales by category of user (in GWh) for the periods indicated:

	Year ended December 31,
	2019		2018		2017		2016
Residential	8,372	43%	8,948	42%	9,143	42%	9,709	44%
Small Commercial	1,692	9%	1,810	9%	1,850	9%	1,819	8%
Medium Commercial	1,549	8%	1,668	8%	1,745	8%	1,821	8%
Industrial	3,503	18%	3,646	17%	3,687	17%	3,677	17%
Wheeling System⁽¹⁾	3,569	18%	3,823	18%	3,968	18%	4,013	18%
Public Lighting	713	4%	724	3%	709	3%	704	3%
Shantytowns	48	0%	553	3%	483	3%	511	2%
Total	19,446	100%	21,172	100%	21,585	100%	22,254	100%

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

Our revenues and results of operations are principally affected by economic conditions in Argentina, changes in our regulated tariffs and fluctuations in demand for electricity within our service area. To a lesser extent, our revenues and results of operations are also affected by service interruptions or reductions in excess of those contemplated by Resolution No. 63/17, which may lead us to incur fines and penalties imposed by the ENRE.

Argentine Economic Conditions and Inflation

Because all of our operations, facilities and users are located in Argentina, we are affected by general economic conditions in the country. In particular, the general performance of the Argentine economy affects the demand for electricity, and inflation and fluctuations in currency exchange rates which affect our costs and our margins. Inflation primarily affects our business by increasing operating costs, while reducing our revenues in real terms.

In December 2001, Argentina experienced an unprecedented crisis that virtually paralyzed the country’s economy through most of 2002 and led to radical changes in the Argentine Government’s policies. The crisis and the Argentine Government’s policies during this period severely affected the electricity sector, as described below. Although over the following years the Argentine economy recovered significantly from the crisis, and the business and political environment was largely stabilized, the Argentine Government has only recently begun to address the difficulties experienced by the Argentine electricity sector as a result of the crisis and its aftermath. However, we believe that the current recovery and the measures adopted by the Macri administration in favor of the electricity sector, such as establishing incentives for the construction of additional generation facilities and the creation of trust funds to further enhance generation, transmission and distribution of electricity throughout the country, have set the stage for growth opportunities in our industry.

In 2016, under the Macri administration the methodology used for the calculation of the economic indicators at the INDEC was updated. As a consequence, all the official economic data since 2004 was revised.

Following years of hyperinflation and economic recession, in 1991 the Argentine Government adopted an economic program that sought to liberalize the economy and impose monetary discipline. The economic program, which came to be known as the Convertibility Regime, was centered on the Convertibility Law of 1991 (the “Convertibility Law”) and a number of measures intended to liberalize the economy, including the privatization of a significant number of public sector companies (including certain of our subsidiaries and co-controlled companies). The Convertibility Law established a fixed exchange rate based on what is generally known as a currency board. The goal of this system was to stabilize the inflation rate by requiring that Argentina’s monetary base be fully backed by the Central Bank’s gross international reserves. This restrained the Central Bank’s ability to effect changes in the monetary supply by issuing additional Pesos and fixed the exchange rate of the Peso and the U.S. Dollar at Ps.1.00 to U.S.$1.00.

The Convertibility Regime temporarily achieved price stability, increased the efficiency and productivity of the Argentine economy and attracted significant foreign investment to Argentina. At the same time, Argentina’s monetary policy was tied to the flow of foreign capital into the Argentine economy, which increased the vulnerability of the economy to external shocks and led to increased reliance on the services sector of the economy, with the manufacturing, agricultural and industrial sectors lagging behind due to the relative high cost of Peso-denominated products in international markets as a result of the Peso’s peg to the U.S. Dollar. In addition, related measures restricted the Central Bank’s ability to provide credit, particularly to the public sector.

Following the enactment of the Convertibility Law, inflation declined steadily and the economy experienced growth through most of the period from 1991 through 1997. This growth slowed from 1998 on, however, as a result of the Asian financial crisis in 1997, the Russian financial crisis in 1998 and the depreciation of Brazil’s currency in 1999, which led to the widespread withdrawal of investors’ funds from emerging markets, increased interest rates and a decline in exports to Brazil, Argentina’s principal export market at the time. According to INDEC, in the fourth quarter of 1998, the Argentine economy entered into a recession that caused the gross domestic product to decrease by 3.4% in 1999, 0.8% in 2000 and 4.4% in 2001. In the second half of 2001, Argentina’s recession worsened significantly, precipitating a political and economic crisis at the end of 2001.

2001 Economic Crisis

Beginning in December 2001, the Argentine Government implemented an unexpected number of monetary and foreign exchange controls measures that included restrictions on the free disposition of funds deposited with banks and on the transfer of funds abroad without prior approval by the Central Bank, some of which are still in effect. On December 21, 2001, the Central Bank decided to close the foreign exchange market, which amounted to ade facto depreciation of the Peso. On December 24, 2001, the Argentine Government suspended payment on most of Argentina’s foreign debt.

The economic crisis led to an unprecedented social and political crisis, including the resignation of President Fernando De la Rúa and his entire administration in December 2001. After a series of interim Governments, in January 2002 the Argentine congress appointed Senator Eduardo Duhalde, a former vice-president and former governor of the Province of Buenos Aires, to complete De la Rúa’s term through December 2003.

On January 6, 2002, the Argentine congress enacted the Public Emergency Law, which introduced dramatic changes to Argentina’s economic model, empowered the Argentine Government to implement, among other things, additional monetary, financial and foreign exchange measures to overcome the economic crisis in the short term and brought to an end the Convertibility Regime, including the fixed parity of the U.S. Dollar and the Peso. Following the adoption of the Public Emergency Law, the Peso devalued dramatically, reaching its lowest level on June 25, 2002, at which time it had devalued from Ps.1.00 to Ps.3.90 per U.S. Dollar according to Banco Nación. The depreciation of the Peso had a substantial negative effect on the Argentine economy and on the financial condition of individuals and businesses. The depreciation caused many Argentine businesses (including us) to default on their foreign currency debt obligations, significantly reduced real wages and crippled businesses that depended on domestic demand, such as public utilities and the financial services industry. The depreciation of the Peso created pressure on the domestic pricing system and triggered very high rates of inflation. According to INDEC, during 2002 the Argentine WPI increased by approximately 118% and the Argentine CPI rose approximately 41%.

Following the adoption of the Public Emergency Law, the Argentine Government implemented measures, whether by executive decree, Central Bank regulation or Argentine legislation, attempting to address the effects of the collapse of the Convertibility Regime, recover access to financial markets, reduce Government spending, restore liquidity to the financial system, reduce unemployment and generally stimulate the economy.

Pursuant to the Public Emergency Law, the Argentine Government, among other measures:

·	converted public utility tariffs from their original U.S. Dollar values to Pesos at a rate of Ps.1.00 per U.S.$1.00;
·	froze all regulated distribution margins relating to the provision of public utility services (including electricity distribution services);

·	revoked all price adjustment provisions and inflation indexation mechanisms in public utility concessions (including our concession); and
·	empowered the Argentine Executive Branch to conduct a renegotiation of public utility contracts (including our concession) and the tariffs set therein (including our tariffs).

These measures, combined with the depreciation of the Peso and high rates of inflation, had a severe effect on public utility companies in Argentina (including us). Because public utility companies were no longer able to increase tariffs at a rate consistent with the increased costs they were incurring, increases in the rate of inflation led to decreases in their revenues in real terms and a deterioration of their operating performance and financial condition. Most public utility companies had also incurred large amounts of foreign currency indebtedness to finance the capital improvement and expenditure programs. At the time of these privatizations, the capital structures of each privatized company were determined taking into account the Convertibility Regime and included material levels of U.S. Dollar‑denominated debt. Following the elimination of the Convertibility Regime and the resulting depreciation of the Peso, the debt service burden of these utility companies significantly increased, which when combined with the margin freeze and conversion of tariffs from U.S. Dollars to Pesos, led many of these utility companies (including us) to suspend payments on their foreign currency debt in 2002.

Economic Recovery and Outlook

Beginning in the second half of 2002, Argentina experienced economic growth driven primarily by exports and import‑substitution, both facilitated by the lasting effect of the depreciation of the Peso in January 2002. While this depreciation had significant adverse consequences, it also fostered a reactivation of domestic production in Argentina as the sharp decline in the Peso’s value against foreign currencies made Argentine products relatively inexpensive in the export markets. At the same time, the cost of imported goods increased significantly due to the lower value of the Peso, forcing Argentine consumers to substitute their purchase of foreign goods with domestic products, substantially boosting domestic demand for domestic products.

From 2003 to 2007, the economy continued recovering from the 2001 economic crisis. The economy grew by 8.8% in 2003, 9.0% in 2004, 9.2% in 2005, 8.5% in 2006 and 8.7% in 2007, led by domestic demand and exports. From a demand perspective, private sector spending was accompanied by a combination of liberal monetary and conservative fiscal policies. Growth in spending, however, consistently exceeded the rate of increase in revenue and nominal GDP growth. From a supply perspective, the trade sector benefited from a depressed real exchange rate, which was supported by the intervention of the Central Bank in the foreign exchange market. Real exports improved, in part due to growth in Brazil, and the current account improved significantly, registering surpluses in 2004, 2005, 2006 and 2007.

Argentina’s economy grew by 7% in 2008, 19.5% less than in 2007. According to the INDEC, growth was negative in both the first and the fourth quarter of 2008 (-0.3% for both periods) as compared to the same periods in 2007, without adjusting for seasonality. This negative growth is primarily attributable to the conflict between the Argentine Government and farmers in early 2008 and the global financial crisis, which deepened in the second half of 2008.

By the end of 2008, the Argentine Government enacted a series of measures aimed at counteracting the decline in the level of economic activity, including special tax rates and less stringent foreign exchange restrictions in connection with the repatriation and national investment of capital previously deposited abroad by Argentine nationals, extensions in the payment terms for overdue taxes and social security taxes, reductions in payroll tax rates for companies that increase their headcounts, creation of theMinisterio de Producción (Ministry of Production), announcements regarding the construction of new public works, consumer loans for the acquisition of durable goods and loans to finance exports and working capital for industrial companies, as well as various agricultural and livestock programs, all aimed at minimizing lay-offs during the current global financial crisis.

In 2009, after six years of robust and continuous growth, the Argentine economy, according to official indicators, grew by only 0.1%, and according to private indicators, contracted by 3.5%.

According to official indicators, in 2011, real GDP in Argentina grew by approximately 8.4%, furthering the growth trend showed in 2010.

In 2012, according to the official information created and disseminated by the INDEC, the economy expanded 0.8%.

According to official indicators, Argentina’s real GDP grew around 2.9% in 2013, compared to 0.8% in 2012. In 2014, the economic activity grew by approximately 0.2%, compared to 2.9% in 2013.

In January 2014, the Peso lost approximately 19% of its value with respect to the U.S Dollar.

During 2015, the economy registered a growth of approximately 2.5%. The level of activity was driven by the effect that the summer crop had on GDP growth in the second and third quarter, while during the last months of the year the economy showed a more moderate expansion.

In terms of supply, industrial production continued showing a poor performance, the exchange rate lagged, restrictions to import intermediate goods continued and, the deceleration of the main Argentine commercial partners’ growth and a weak domestic and external demand impacted on the performance of the manufacturing activity. In terms of expenses, consumption showed a good performance even though consumers continued acting with caution.

With reference to inflationary pressures, a significant deceleration in the increase of prices was observed during the first half of 2015, related with the high 2014 baseline. Throughout the last months of 2015, retail prices relatively picked up although the average growth rate was lower than that of the previous year.

On December 17, 2015, the Peso depreciated approximately 36% against the U.S. Dollar following the announcement of the lifting of a significant portion of exchange restrictions by the Macri administration, which caused the Peso to U.S. Dollar exchange rate to reach Ps.13.40 to U.S.$1.00.

In 2016, the Argentine economy contracted by 2.2%. Although the economic activity showed a slight improvement during the last months of the year, 2016 is considered to be a recessive year.

The negative results may be explained by the deepening contraction in certain sectors that performed poorly in terms of activity. In this sense, during the second quarter of 2016, lower levels of agricultural production were exacerbated by a lower than expected harvest (affected by unusual rains), in addition to a large decline in construction activity and a decrease in retail sector activity. Industrial production also showed a weak performance.

In terms of inflation, the pace of growth of domestic prices accelerated during the first half of 2016 as a result of the increase in the value of the U.S. Dollar relative to the Peso in the official market. In addition, monthly price increases in the first half of 2016 were mainly related to an update of some regulated prices such as public utility tariffs (gas and electricity prices) and urban transport, mainly in the Buenos Aires metropolitan region. As of the third quarter of 2016, price increases began to decelerate as a result of the absence of new tariff increases, the stagnation of economic activity, the relative low price of the U.S. Dollar in the local market and the restrictive monetary policy, through high interest rates that sought to contain the currency pressure, drove the deceleration in inflation, which slowed to a monthly average of 1.1% in the July to September 2016 period. During the last quarter of 2016, the monthly inflation average was 1.7%, and the annual rate of increase in consumer prices ended the year slightly below 40%. The Macri administration announced the adoption of an inflation targeting regime to apply in parallel with the floating exchange rate regime and established inflation targets for the next four years. The Central Bank has increased intervention efforts in the foreign exchange market to reduce excess monetary imbalances and raised Peso interest rates to offset inflationary pressure. Since January 2017, the Central Bank started to use the seven-day repo reference rate as the anchor of its inflation targeting regime. LEBACs are used to manage liquidity.

After the currency depreciation at the beginning of the Macri administration, the Central Bank changed to a flexible exchange market regime, which resulted in a unified foreign exchange system. In 2016, some modest depreciation pressure following Brexit in June and the U.S. election on November 8, 2016, caused the Peso to weaken, ending at Ps.16.10 to U.S.$1.00 on December 31, 2016. By the end of the year, the Peso depreciated by approximately 20% against the U.S. Dollar.

Argentina’s economy grew by 2.8% during 2017, driven by an increase in private consumption, public spending and investment which counteracted the 2.2% contraction in 2016. The Argentine economy’s recovery is attributed to both external and domestic factors. The external factors included, among others, an overall improvement of the Brazilian economy, which led to an increase in Argentina exports to Brazil. The domestic factors included, among others, the growth in average wages, an increase in welfare and public works spending by the Argentine government and the increase in bank lending activity to the private sector, which stimulated consumption and private investment. However, the performance of the various sectors of the economy was varied. Sectors buoyed by the change in relative prices, by public works spending or by specific trade agreements, such as agriculture, construction and the automotive industry, respectively, recorded high growth rates during 2017. By contrast, those affected by the relaxation of import controls and the Peso’s appreciation, such as the textiles and electronics industries, continued their contraction.

Inflation, measured by its general level, declined by approximately 15%, from 40.5% in December 2016 to 24.8% in December 2017, having achieved the disinflation process simultaneously with the updating of some public services tariffs.

On the monetary policy front, the Central Bank formally instituted an inflation targeting regime, and established a new policy interest rate (the 7-day interbank repo rate). With a view to bringing inflation within the target band (between 12% and 17% for 2017), the monetary authority maintained a policy of high interest rates, which led to increased absorption of pesos through the placement of central bank bills (LEBAC) and repos; the policy interest rate followed an upward trend during the year, from 24.75% in January 2017 to 28.75% in December 2017.

The Central Bank maintained the free floating exchange rate and intervened in the foreign exchange market only at times of rapid rises. In this context, the nominal Ps./U.S.$ exchange rate increased by 17% during the year 2017. Although during the last days of 2017, the price of the US currency in the domestic exchange market was rising, the dollar closed December at levels around Ps./U.S.$18.00 (monthly average).

In 2017, there was a real increase in public spending. As a result of stronger growth in revenues as compared to expenditures, the primary deficit decreased to 3.9% of GDP in 2017 as compared to 4.3% in 2016); after payment of interest on the debt, the fiscal outturn stood at 6.1% of GDP, above the 5.9% recorded in 2016. The fiscal deficit remained high, notwithstanding the policy of reducing subsidies for public services, the extraordinary revenues from the special tax under the capital legalization (or repatriation) program, and the increase in tax receipts associated with greater economic activity.

The fiscal deficit and the current account deficit were financed by a marked increase in external borrowing in 2017, which also underpinned an increase in international reserves. The current account deficit widened in 2017, standing at 5.5% of GDP, as a result of higher imports of goods and services (reflecting the economic recovery and the reduction in import controls and tariff rates), as well as an increase in debt service payment obligations with respect to interest due on Argentina’s public external debt.

After a slight recovery in 2017, the first quarter of 2018 showed a similar positive growth trend, although, a lower than expected harvest and the lower number of international creditors willing to finance the Argentine state highlighted the macroeconomic weaknesses facing Argentina. In addition, the US dollar denominated external debt assumed by the Argentine Government and the lack of US dollars to deal with maturities relating to such debt, Argentina has to resort to the IMF to obtain the foreign currency that could not be obtained by agriculture, exports, or external financing. On May 8, 2018, the current administration announced that the Argentine Government would initiate negotiations with the IMF with a view to entering into a stand-by credit facility that would give Argentina access to financing by the IMF. On June 20, 2018, the executive board of the IMF approved the terms of the stand-by arrangement, consisting of a stand-by credit facility for U.S.$50.0 billion, subject to adjustments and compliance with certain political and fiscal performance guidelines by the Argentine Government. On October 26, 2018, a first review of the SBA concluded with the enlargement of the arrangement for U.S.$5.7 billion.

The lack of predictability generated by the agreement with the IMF generated volatility in the exchange market. By the end of June 2018, the Peso has lost 54% of its value against the US dollar, as compared to exchange rate of December 2017. At the end of August, 2018, the exchange rate recorded, a then-historical maximum Ps. 40 per U.S.$1. The rise in the exchange rate and the winding down of the Lebac program, which strongly increased the monetary base, generated an increase in inflation in 2018.

Given the new inflationary context, the BCRA applied a restrictive monetary policy, strongly increasing the reference interest rates. Such policy, generated a significant retraction in economic activity.

2019 Macroeconomic Conditions

Economic Activity

In 2019, the economic activity decreased by 2.2% compared to 2018, mainly due to the fact that private consumption, public consumption and investment decreased 6.4%, 1.5% and 15.9%, respectively.

The estimated contraction in the activity reached 9 of the 16 economic sectors, with financial intermediation (11.5%), wholesale, fishing (10.3%), retail trade and repairs (7.8%), manufacturing industry (6.3%), and construction (5.5%) being the most affected ones. Such contraction was partially offset by increases recorded in, among other, the following categories: agriculture, livestock, hunting and forestry (21.5%), private households with domestic service (4.4%), and mining and quarrying (1.2%). The economic activity contraction was also partially offset by a 9.4% year-on-year increase in exports net of imports.

Price Trends

In 2019, the Cost-of-Living Index published by the INDEC showed a variation of 53.8%. The greatest variations were recorded in categories of health (72.1%), communications (63.9%), and household equipment and maintenance (63.7%). The categories affected to a lesser extent were housing, water, electricity and other fuels (39.4%), education (47.1%), and recreation and culture (48.5%). Wages measured by the Permanent Workers’ Average Taxable Remuneration (Remuneración Imponible Promedio de los Trabajadores Estables or “RIPTE”) registry, recorded a year-on-year increase of 44.4% as of December 2019, compared to the same month of 2018.

Trade Balance

According to the INDEC, the cumulative current deficit account of 2019 reached U.S.$3,462 million in 2019. However, the trade balance recorded a surplus of U.S.$18,277 million, with Free on Board value exports amounting to U.S.$65,155 million, whereas the Cost, Insurance and Freight value of imports was U.S.$46,928 million. During 2019, exports of primary products as well as agricultural manufacturing exports registered a surplus of U.S.$14,951 million and U.S.$22,610 million respectively, whereas industrial manufacturing exports registered a deficit of U.S.$19,479 million. Fuel and energy exports recorded a surplus of U.S.$0.104 million. As for imports, there was a contraction compared to 2018 (accounting for a 25% decrease) in the following main categories: automotive (U.S.$393 million), capital goods (U.S.$1,928 million), fuel and lubricants (U.S.$712 million), consumer goods (U.S.$1,473 million), parts and accessories (U.S.$2,143 million), and intermediate goods (U.S.$3,477 million).

Fiscal Situation

In 2019, the Non-Financial Public Sector’s fiscal accounts recorded at December 2019 a cumulative primary and total deficit of 0.5% and 4.0% of GDP, respectively. The total annual variation of tax revenues measured in Argentine pesos, according to the figures published by the Federal Administration of Public Revenues (AFIP), closed 2019 with an increase of 47.4% as compared to 2018. Furthermore, primary expenditure recorded in 2019 by the National Treasury showed a year-on-year variation of 37.2%.

Tariffs

Our revenues and margins are substantially dependent on the composition of our tariffs and on the tariff setting and adjustment process contemplated by our concession.

The following chart shows the variation in Edenor’s average tariffs, including taxes, in Pesos per MWh for the periods indicated:

Under the terms of our concession, our tariffs for all of our users (other than users in the wheeling system) are composed of:

·	the cost of electric power purchases, which we pass on to our users, and a fixed charge (which varies depending on the category and level of consumption of each user and their energy purchase prices) to cover a portion of our energy losses in our distribution activities (determined by reference to a fixed percentage of energy and power capacity for each respective voltage level set forth in our concession);
·	our regulated distribution margin, which is known as the value-added for distribution, or VAD; and
·	any taxes imposed by the Province of Buenos Aires or the City of Buenos Aires, which may differ in each jurisdiction.

Certain of our large users (which we refer to as wheeling system users) are eligible to purchase their energy needs directly from generators in the WEM and only acquire from us the service of electricity delivery. Therefore, our tariffs for these large users (known as wheeling charges) do not include, charges for energy purchases. Accordingly, wheeling charges consist of the fixed charge for recognized losses (determined by reference to a fixed percentage of energy and power capacity for each respective voltage level set forth in our concession) and our distribution margin. As a result, although the amounts billed to wheeling system users are relatively lower than those billed to other large users, namely industrial users, the distribution margin on sales to wheeling system users is similar to that of other large users because we do not incur the corresponding cost of electric power purchases related to those sales.

Recognition of Cost of Electric Power Purchases

As part of our tariffs, we bill our users for the costs of our electric power purchases, which include energy and capacity charges. In general, we purchase electric power at a seasonal price, which is approved by the ENRE every six months and reviewed quarterly. Our electric power purchase price reflects transportation costs and certain other regulatory charges (such as the charges imposed by theFondo Nacional de Energía Eléctricaor National Electricity Energy Fund).

On January 25, 2016, the ME&M issued Resolution No. 6/16, approving the seasonal WEM prices for each category of users for the period from February 2016 through April 2016. Such resolution adjusted the seasonal prices as required by the regulatory framework. Energy prices in the spot market were set by CAMMESA, which determined the price to be charged by generators for energy sold in the spot market of the WEM on an hourly basis. The WEM prices result in the elimination of certain energy subsidies and a substantial increase in electricity rates for individuals. Resolution No. 6/16 introduced different prices depending on the categories of users. Such resolution also contemplated a social tariff for residential users who comply with certain consumption requirements, which included a full exemption for monthly consumptions below or equal to 150 KWh and tariffs benefits for users who exceed such consumption level but achieve a monthly consumption lower than that of the same period in the immediately preceding year.

On February 1, 2017, Resolution No. 20 – E/17 dated January 27, 2017, of the SEE pursuant to which the summer seasonal rescheduling for the WEM was approved corresponding to the period held between February 1 and April 30, 2017.

Resolution No. 20 – E/17 incorporated a new category of consumer denominated “electricity-dependent user”. An electricity dependent user is a person who registers an extraordinary consumption of electrical energy due to special equipment and / or infrastructure for a disease diagnosed by a physician or a stable and permanent electrical service to address medical needs within their home. The resolution established the provision of 600 KWh per month free of charge and an electricity reference price that varies according to the level of savings and demands registered compared to the previous month. In addition, it stipulates that as from February 2017, the maximum spot price for the approval of the WEM is Ps.240 Ps./MWh and fixes the charge value corresponding to the National Fund for Electric Energy at Ps.15.50 Ps./MWh.

In May 2017, Law No. 27,351 was enacted, which guarantees the permanent and free of charge supply of electricity to those individuals who qualify as dependent on power for reasons of health to avoid risks in their lives or health. The law states that the account holder of the service or someone who lives with a person that is registered at the “Registry of Electricity Dependent for Reasons of Health” will be exempt from the payment of any and all connection fees and will benefit from a special free of charge tariff treatment for the electric power supply service.

In July 2017, the ENRE issued Resolution No. 292 stating that those discounts are to be made as from the effective date of the aforementioned law, and instructed CAMMESA to implement those discounts in its billing to the distribution companies.

According to Executive Order 740 of the Executive Branch, dated September 20, 2017, the ME&M will be the Authority of Application of Law No. 27,351, whereas the Ministry of Health will be responsible for determining the minimum conditions necessary for eligibility for the “Registry of Electricity Dependent for Reasons of Health.”

On September 2017, the Ministry of Health issued Resolution No. 1,538-E/17, which creates the Registry of Electricity Dependent for Reasons of Health (“RECS”), under the jurisdiction of the Ministry of Health, operating under the authority of the Under Secretariat for the Management of Health Care Services.

On October 31, 2017, the ENRE informed pursuant to Note No 128,399, through the proceedings carried out by the ME&M, the decision to postpone the application of the CPD increase in the RTI for November 1, 2017 to December 1, 2017, as well as the application of the CPD update which was made in August 2017.

Due to the deferring of the CPD increases, the ENRE notified a new tariff schedule to be applied in the December 2017- January 2018 period pursuant to Resolution No. 603/17, which was offset due to a retroactive adjustment, CPD’s updates that were not granted and the previously mentioned application.

In addition, such tariff schedule included the modification of seasonal prices, costs of transport and saving billings and bonuses according to the incentive plan established pursuant to SEE Resolution No. 1091/17. By way of this resolution, the prices to be applied for the WEM for the period between December 1 and January 31, 2018, by keeping in Ps.3,157/Mw per month the power output reference price and by differentiating the stabilized reference energy prices applied to users with output power requirements over 300 kW in approximately (off-peak prices) Ps.1,329/MWh, and for the remaining users in Ps.839/MWh. The saving billing of the incentive plan was modified, by establishing a 10% discount to the stabilized energy price for those residential users who reduce the consumption in at least a 20% compared to the consumption registered on the same month in 2015, having removed saving categories between 10% and 20%. Moreover, a new application methodology for the social tariff was introduced.

Also, by means of resolution ENRE No. 1091/17, an increase was evidenced in the transport prices of electric energy which were transferred to tariffs in Ps.45.1/MWh.

On January 31, 2018, the ENRE issued Resolution No. 33/18, whereby it approved the CPD values for July 2017 through December 2017, which were in the order of 11.99%, the values of the 48 monthly installment to be applied in accordance with the provisions of ENRE Resolution No. 329/17 which were deferred in the year 2017, and the electricity rate schedule to be applied to consumption recorded as from February 1, 2018. Additionally, it is informed that the average electricity rate value amounts to Ps.2.4627/KWh.

On July 31, 2018, the ENRE issued Resolution No. 208/18, pursuant to which it approved, the CPD for January 2018 through June 2018 of which 7.93% was applied as of August 1, 2018, and 6.51% in six consecutive monthly installments as of February 1, 2019. The CPD amounted to 15.85%. Moreover, Resolution No. 208/18 established a system of caps for the social tariff as well as the values that the Company had to apply to determine and credit discounts in the electricity bills of the users affected by deficiencies in the quality of the technical product and/or the quality of the technical and commercial service from 2018 to February 2019. Additionally, the informed average electricity rate value amounted to Ps. 2.9871/KWh.

On December 27, 2018, the SGE issued Resolution No. 366/18, pursuant to which approved the summer seasonal programming for the WEM submitted by CAMMESA, thus determining new prices for power capacity, energy and transmission from February 2019 to October 2019. Furthermore, the social tariff and savings bonuses for the residential tariff were eliminated, as beneficiaries have been transferred to the provincial jurisdictions, which will bear their cost and implementation.

On January 31, 2019, ENRE issued Resolution No. 25 which approved the values of Edenor’s tariff scheme as from February 1, 2019, incorporated the new power capacity reference prices and stabilized prices for energy determined by the SGE until April 30, 2019. In turn, the ENRE informed that under the transfer of jurisdiction from the Argentine Government to the Province of Buenos Aires and the City of Buenos Aires, the guidelines for the social tariff regime effective as of December 31, 2018 will remain in effect. As of the date of this annual report, the Province of Buenos Aires and the City of Buenos Aires are complying with the payment of the social rate regularly.

Moreover, on January 31, 2019, pursuant to Resolution No. 27/19, the ENRE approved the VAD updates for the second six-month period of 2018 and the pending update corresponding to the first six-month period of 2019, totaling a 32.0% increase applicable as from March 1, 2019. Additionally, the application of the new -1.59% “E”-factor adjustment will be deducted from cumulative inflation updates.

Furthermore, the cost of deferrals for August 2018 through February 2019 and for the month of February 2019, totaled Ps.1,005 million and Ps.841 million respectively, and will be paid in 5 installments as from March 2019. Additionally, Ps.51 million will be collected under the same method due to the partial recognition of the appeal filed by Edenor to Resolution No. 208/18, which acknowledged additional costs that had not been calculated as part of prior tariffs.

On April 30, 2019, the Resolution SRRYME No. 14/19 was published, approving the Programming Final Winter for the WEM raised by CAMMESA, corresponding to the period from May 1 to July 31, 2019, and the corresponding one for the period from August 1, 2019 to October 31, 2019. This resolution divided the general distributor demand between residential and non-residential, and maintained the category of Large Distributor Users at 300 kWand modified the Power Reference Prices (“PRP”) and the Stabilized Price of Energy (“SPE”) relating to the May 1-October 31, 2019 period. For residential customers, seasonal prices remained unchanged for both quarters.

Subsequently, as from May 1, 2019, pursuant to Resolution ENRE No. 104/2019, a new tariff table was set up, taking into account the seasonal prices set forth by Resolution SRRYME No. 14/19, for the quarter from May 1 to July 31, 2019, with increases only generated by new seasonal energy prices for all non-residential customers.

On September 19, 2019, the Electricity Rate Schedules Maintenance Agreement was entered into between the Federal Government and the Company – the following points were defined at the tariff level:

The CPD with the six-monthly update to be implemented from August 1, 2019, will become effective on January 1, 2020. The difference in the CPD between the CPD applied on August 1, 2019 and the one applied on January 1, 2020 (for the period August 1, 2019 to December 31, 2019) will be recovered in 7 monthly and consecutive installments from January 1, 2020 and adjusted according to the appropriate CPD setting.

The updating of the tariff table with respect to seasonal energy prices will take place as from January 1, 2020. In addition, the difference between the seasonal prices in force between August 1, 2019 and December 31, 2019, and the seasonal prices applied in the tariff table in force as of August 1, 2019, will be recovered as from January 1, 2020 in 7 monthly and consecutive installments, and adjusted according to the methodology provided by CAMMESA for the out-of-term payment.

On December 5, 2019, the Company submitted GAR Note 46/2019 with calculation of the tariff table to be applied from January 2020. This table was calculated following the Electricity Rate Schedules Maintenance Agreement referred to above. Subsequent adjustments were also added for the period from November 2018 to July 2019.

Finally, a correction in the value of CPD calculation of August 2019 was included, given the publication of the final indices, with the new value being 19.05%.

On December 27, 2019, ENRE instructed the Company not to apply the Electricity Rate Schedules Maintenance Agreement as such agreement lost its applicability due to the electricity rate emergency provided for in theProductive Reactivation Law (which freezed the prices of natural gas and electricity for 180 days since its effectiveness). Therefore, the electricity rate schedule that had been applied since May 1, 2019 (pursuant to ENRE Resolution No. 104/19) came back into effect.

We purchased a total of 25,960 GWh in 2019, 25,906 GWh in 2018 and 25,950 GWh in 2017. Following the adoption of certain amendments to the pricing rules applicable to the WEM pursuant to the Public Emergency Law, we have purchased all of our energy supply in the WEM at the spot price. We have not purchased any energy under long-term supply contracts since 2004.

Recognition of cost of energy losses

Energy losses are equivalent to the difference between energy purchased (including wheeling system demand) and energy sold. These losses may be classified as technical and non-technical losses. Technical losses represent the energy that is lost during transmission and distribution within the network as a consequence of natural heating of the conductors and transformers that transmit electricity from the generating plants to the users. Non-technical losses represent the remainder of our energy losses and are primarily due to illegal use of our services. Energy losses require us to purchase additional electricity to satisfy demand and our concession allows us to recover from our users the cost of these purchases up to a loss factor specified in our concession for each tariff category. Our loss factor under our concession is, on average, 10%. Our management is focused on taking the necessary measures to ensure that our energy losses do not increase above current levels because of their direct impact on our gross margins. However, due to the inefficiencies associated with reducing our energy losses below the level at which we are reimbursed pursuant to our concession (i.e., 10%), we currently do not intend to significantly lower our level of losses.

At the time of our privatization, our total energy losses represented approximately 30% of our energy purchases, of which more than two thirds were non-technical losses attributable to fraud and illegal use of our service. Beginning in 1992, we implemented a loss reduction plan (plan de disciplina del mercado, or market discipline plan) that allowed us to gradually reduce our total energy losses to 10% by 2000, with non-technical losses of 2.7%. However, beginning in mid-2001 and up until 2004, we experienced an increase in our non-technical losses, as the economic crisis eroded the ability of our users to pay their bills, and in our technical losses in proportion to the increased volume of energy we supplied during those periods.

The following table sets forth our estimated breakdown between technical and non-technical energy losses experienced in our concession area for the periods indicated.

	Year ended December 31,
	2019	2018	2017	2016	2015
Technical losses	9.6%	8.4%	8.8%	9.6%	11.1%
Non technical losses	10.3%	9.8%	8.3%	7.4%	3.8%
Total losses	19.9%	18.2%	17.1%	17.0%	14.9%

The rolling annual rate of total losses for 2019 increased to 19.9%, compared to 18.2% in the previous year. In Regions II and III, new shantytowns were formed while existing shantytowns continued to grow. In 2019, the increase in total losses is mainly due to the theft of energy in these areas.

In 2019, the plan launched in previous years continued to be implemented, substantially increasing the installation of MIDEs, under a plan that consists in having 250,000 meters in place in 2020. The plan is aimed at normalizing clandestine consumers, inactive customers and chronic delinquent customers. In 2019, 75,160 MIDEs were installed, 57,000 of which are currently operative, reaching 199,728 enabled MIDEs in the entire concession area.

The installation of the new type of MULCON network, which had begun by the end of 2018, continued leveraging the MIDE’s functionalities and increasing invulnerability in neighborhoods with a high fraud rate.

Distribution margin or value‑added for distribution (VAD)

Our concession authorizes us to charge a distribution margin for our services to seek to cover our operating expenses, taxes and amortization expenses and to provide us with an adequate return on our asset base.

Historical Overview of VAD.Our concession originally contemplated a fixed distribution margin for each tariff parameter with semiannual adjustments based on variations in the U.S. wholesale price index (67% of the distribution margin) and the U.S. consumer price index (the remaining 33% of the distribution margin). However, pursuant to the Public Emergency Law, all adjustment clauses in U.S. Dollars or other foreign currencies and indexation clauses based on foreign indexes or other indexation mechanisms included in contracts to be performed by the Argentine Government were revoked. As a result, the adjustment provisions contained in our concession are no longer in force and, from January 2002 through January 2007, we were required to charge the same fixed distribution margin in Pesos established in 2002, without any type of currency or inflation adjustment. These measures, coupled with the effect of accumulated inflation since 2002 and the depreciation of the Peso, have had a material adverse effect on our financial condition, results of operation and cash flows, leading us to record net losses.

Adjustment Agreement.On September 21, 2005, we entered into theActa Acuerdo sobre la Adecuación del Contrato de Concesión del Servicio Público de Distribución y Comercialización de Energía Eléctrica (Adjustment Agreement), an agreement with the Argentine Government relating to the adjustment and renegotiation of the terms of our concession. Because a new Minister of Economy took office thereafter, we formally re-executed the Adjustment Agreement with the Argentine Government on February 13, 2006 under the same terms and conditions originally agreed. The ratification of the Adjustment Agreement by the Argentine Government was completed in January 2007. Pursuant to the Adjustment Agreement, the Argentine Government granted us an increase of 28% in our distribution margin, which includes a 5% increase to fund specified capital expenditures we are required to make under the Adjustment Agreement. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Edenor’s Capital expenditures.” The increase was effective retroactively from November 1, 2005 and remained in effect until the approval of the new tariff scheme under the RTI, in February 2017.

The Adjustment Agreement also contemplated a cost adjustment mechanism for the transitional period during which the RTI process was being conducted. This mechanism, known as the Cost Monitoring Mechanism, or CMM, took into consideration, among other factors, the wholesale and consumer price indexes, exchange rates, the price of diesel and construction costs and salaries, all of which are weighted based on their relative importance to operating costs and capital expenditures.

On January 30, 2007, the ENRE formally approved our new tariff schedule reflecting the 28% increase in the distribution margins charged to our non-residential users contemplated by the Adjustment Agreement. In addition, because the Adjustment Agreement is effective retroactively from November 1, 2005, the ENRE applied the CMM retroactively in each of May and November 2006, the dates in each year on which the ENRE is required to apply the CMM.

Between 2007 and 2016, we requested several CMM adjustments, which were recognized by the ENRE through different resolutions and notes (Resolution No. 1,037/07, Note No. 81,399, Resolution No. 250/13 and Resolution No. 32/15). Only two adjustments were recognized in a timely manner and were incorporated into the tariff structure, while the rest of them were recognized belatedly and not incorporated into our tariff structure.

On November 23, 2012, the ENRE issued Resolution No. 347/12, pursuant to which it established a fixed and variable charge differentiated by category of users, which the distribution companies will collect on account of the CMM adjustments stipulated in clause 4.2 of the Adjustment Agreement, and will use exclusively to finance infrastructure and corrective maintenance of their facilities. Such charges, which were clearly identified in the bills sent to users, were deposited in a special account to be managed by a Trustee. Such amounts were used exclusively to finance infrastructure and corrective maintenance of the facilities.

Pursuant to the SE’s Resolution No. 250/13 and Notes No. 6,852/13, No. 4,012/14, No. 486/14 and No. 1,136/14 of the SE, the Company was authorized to compensate its debt registered under the PUREE against CMM recognitions for the period from May 2008 through December 2014.

In addition, CAMMESA was instructed to issue sale settlements with maturity dates to be determined for the surplus generated after compensation between the credits of the CMM and the PUREE debts, to partially compensate the debt with the WEM. We were also entitled to deposit the remaining sale settlements with maturity dates to be determined in the trust created pursuant to ENRE’s Resolution No. 347/12. As of the date of this annual report, all the sale settlements with maturity dates to be determined issued by CAMMESA were compensated with PUREE debts or with Commercial debt with CAMMESA.

As from February 1, 2015, pursuant to Resolution No. 32/15 of the SE, PUREE funds were considered as part of Edenor’s income on account of the future RTI. We compensated up to January 31, 2015, the debts for PUREE, with claims arising from the calculation of CMM up to January 31, 2016, including the application of interest that could correspond to both concepts.

In January 2016, the ME&M issued Resolution No. 7/16, pursuant to which the ENRE implemented a VAD adjustment to the tariff schedule on account of the future RTI in effect as of February 1, 2016, and took all the necessary actions to conclude the RTI process by February 2017.

In addition, such resolution: (i) abrogated the PUREE; (ii) repealed SE Resolution No. 32/15 as from the date the ENRE resolution implementing the new tariff schedule that became effective; (iii) discontinued the application of mechanisms that imply the transfer of funds from CAMMESA in the form of loan agreements with CAMMESA; and (iv) ordered the implementation of the actions required to terminate the trusts created pursuant to ENRE Resolution No. 347/12. Resolution No. 2/16 of the ENRE partially repealed Resolution No. 347/12, discontinuing the FOCEDE and ordered the Company to open a special bank account with a Central Bank authorized entity where the funds received pursuant to Resolution No. 347/12 were deposited. Pursuant to ME&M Resolution No. 7/16, the ENRE issued Resolution No. 1/16 establishing a new tariff structure.

Integral Tariff Revision. During the year 2016, the Company, guided by the ENRE, complied with all the procedural obligations required to complete the RTI process set forth in the Adjustment Agreement. The RTI process was completed on February 1, 2017, on which date the ENRE issued Resolution No. 63/17. Such resolution established a new tariff schedule which included a VAD maximum increase of 42% for February 2017, as well as two additional phase increases for the months of November 2017 and February 2018. On January 31, 2019, ENRE issued Resolution No. 25 which approved the values of Edenor’s tariff scheme as from February 1, 2019. Moreover, on January 31, 2019, pursuant to Resolution No. 27/19, the ENRE approved the VAD updates for the second six-month period of 2018 and the pending update corresponding to the first six-month period of 2019, totaling a 32.0% increase applicable as from March 1, 2019.

The following table sets forth the relative weight of our distribution margin in our average tariffs per category of user (other than wheeling system, public lighting and shantytown users) in our concession area at the dates indicated. Although the VAD and electric power purchases per category of user are the same, we are subject to different taxes in the Province of Buenos Aires and the City of Buenos Aires.

	VAD
Tariff⁽¹⁾	November	January	February	October 2008	Res.1301	Res. 1	Res. 92/17	Res. 92/17	Res. 603/17	Res. 33/18	Res. 208/18	Res. 25/19	Res. 27/19	Res. 104/19
Tariff⁽¹⁾	2001	2005	2007	October 2008	2011⁽²⁾	2016	Feb. 2017	Mar. 2017	Dic. 2017	Dic. 2017	Feb. 2018	Feb. 2019	Mar. 2019	May. 2019
Residential
TIRI (0-300)	49.40%	44.50%	44.50%	44.69%	11.26%	30.63%	26.60%	19.07%	18.10%	18.23%	15.24%	11.46%	14.41%	14.41%
TIRI2 (301-650)	36.20%	33.00%	33.00%	30.81%	4.80%	15.40%	23.49%	16.54%	15.20%	15.31%	12.69%	9.44%	12.03%	12.03%
TIR# (651-800)				32.08%	4.55%	14.48%	26.66%	19.15%	17.74%	17.73%	14.81%	11.12%	14.02%	14.02%
TIR4 (801-900)				31.63%	4.32%	13.91%	29.46%	21.55%	20.08%	19.98%	16.81%	12.74%	15.95%	15.95%
TIR5 (90-1000)				32.75%	4.35%	14.04%	33.25%	24.91%	23.42%	23.20%	19.72%	15.14%	18.78%	18.78%
TIR6 (1001-1200)				26.29%	4.19%	15.98%	37.51%	28.95%	27.52%	27.09%	23.31%	18.20%	22.31%	22.31%
TIR 7 (1201-1400)				27.18%	3.98%	15.25%	41.21%	32.64%	32.80%	34.80%	30.69%	24.81%	30.91%	30.91%
TIR8 (1401-2800)				25.94%	4.81%	17.83%	45.69%	37.36%	40.50%	42.35%	38.30%	32.13%	36.57%	36.57%
TIR9 (> 2800)				22.50%	3.84%	14.81%	46.83%	38.62%	39.94%	40.79%	36.69%	30.53%	35.18%	35.18%

Commercial - small demands
TIG1	55.10%	40.00%	47.80%	48.76%	21.91%	53.18%	53.79%	45.89%	48.82%	47.19%	43.14%	37.48%	42.91%	41.83%
TIG2	53.60%	31.10%	43.60%	42.39%	15.97%	41.52%	52.94%	44.89%	47.86%	46.18%	42.08%	36.38%	41.77%	40.67%
TIG3				37.40%	9.13%	24.24%	52.74%	44.65%	47.54%	45.92%	41.81%	36.11%	41.32%	40.22%

Commercial - medium demand
T2	43.30%	27.90%	35.50%	38.03%	16.03%	44.80%	74.36%	74.36%	43.55%	43.41%	39.03%	31.83%	37.30%	36.29%

Industrial
T3 low voltage below 300kw	44.20%	26.50%	34.30%	37.86%	15.37%	43.74%	46.90%	37.97%	39.76%	39.59%	35.14%	27.96%	33.33%	32.34%
T3 low voltage over 300kw	42.60%	24.50%	32.10%	27.09%	11.99%	22.80%	23.80%	23.52%	27.24%	29.40%	22.50%	18.29%	22.82%	22.13%
T3 medium voltage below 300kw	29.30%	14.10%	19.70%	25.25%	8.46%	30.72%	30.38%	22.08%	23.59%	23.43%	19.76%	14.58%	18.37%	17.64%
T3 medium volgate over 300kw	27.30%	12.30%	17.50%	17.71%	7.09%	14.50%	13.19%	13.00%	15.44%	17.13%	12.31%	9.59%	12.43%	11.99%

Average Tariff	41.20%	28.50%	33.90%	33.16%	9.57%	28.33%	39.08%	32.46%	32.18%	32.41%	27.75%	22.09%	26.83%	26.36%

	Average Taxes
Tariff⁽¹⁾	November	January	February	October 2008	Res.1301	Res. 1	Res. 92/17	Res. 92/17	Res. 603/17	Res. 33/18	Res. 208/18	Res. 25/19	Res. 27/19	Res. 104/19
Tariff⁽¹⁾	2001	2005	2007	October 2008	2011⁽²⁾	2016	Feb. 2017	Mar. 2017	Dic. 2017	Dic. 2017	Feb. 2018	Feb. 2019	Mar. 2019	May. 2019
Residential
TIRI (0-300)	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%	28.70%
TIRI2 (301-650)	29.20%	29.20%	29.20%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%
TIR# (651-800)				29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%
TIR4 (801-900)				29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%
TIR5 (90-1000)				29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%
TIR6 (1001-1200)				29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%
TIR 7 (1201-1400)				29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%
TIR8 (1401-2800)				29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%
TIR9 (> 2800)				29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%	29.23%

Commercial - small demands
TIG1	25.70%	25.70%	25.70%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%
TIG2	25.60%	25.60%	25.60%	25.64%	25.64%	25.64%	25.64%	25.64%	25.64%	25.64%	25.64%	25.64%	25.64%	25.64%
TIG3				25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%

Commercial - medium demand
T2	25.60%	25.60%	25.60%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%	25.63%

Industrial
T3 low voltage below 300kw	25.70%	25.70%	25.70%	25.66%	25.66%	25.66%	25.66%	25.66%	25.66%	25.66%	25.66%	25.66%	25.66%	25.66%
T3 low voltage over 300kw	25.60%	25.60%	25.60%	25.62%	25.62%	25.62%	25.62%	25.62%	25.62%	25.62%	25.62%	25.62%	25.62%	25.62%
T3 medium voltage below 300kw	25.70%	25.70%	25.70%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%	25.68%
T3 medium volgate over 300kw	25.70%	25.70%	25.70%	25.69%	25.69%	25.69%	25.69%	25.69%	25.69%	25.69%	25.69%	25.69%	25.69%	25.69%

Average Tariff	27.20%	27.20%	27.20%	27.24%	27.24%	27.24%	27.24%	27.24%	27.24%	27.24%	27.24%	27.24%	27.24%	27.24%

	Electric Power Purchases
Tariff⁽¹⁾	November	January	February	October 2008	Res.1301	Res. 1	Res. 92/17	Res. 92/17	Res. 603/17	Res. 33/18	Res. 208/18	Res. 25/19	Res. 27/19	Res. 104/19
Tariff⁽¹⁾	2001	2005	2007	October 2008	2011⁽²⁾	2016	Feb. 2017	Mar. 2017	Dic. 2017	Dic. 2017	Feb. 2018	Feb. 2019	Mar. 2019	May. 2019
Residential
TIRI (0-300)	21.90%	26.80%	26.80%	26.61%	60.00%	40.65%	44.71%	52.23%	53.20%	53.07%	56.06%	59.84%	56.89%	56.89%
TIRI2 (301-650)	34.60%	37.80%	37.80%	39.95%	65.91%	55.33%	47.28%	54.23%	55.57%	55.45%	58.08%	61.32%	58.74%	58.74%
TIR# (651-800)				38.68%	66.15%	56.23%	44.11%	51.61%	53.02%	53.04%	55.96%	59.64%	56.74%	56.74%
TIR4 (801-900)				39.13%	66.39%	56.81%	41.30%	49.22%	50.68%	50.78%	53.96%	58.03%	54.81%	54.81%
TIR5 (90-1000)				38.02%	66.37%	56.69%	37.51%	45.86%	47.34%	47.56%	51.05%	55.62%	51.99%	51.99%
TIR6 (1001-1200)				44.48%	66.51%	54.73%	33.26%	41.81%	43.25%	43.67%	47.46%	52.57%	48.45%	48.45%
TIR 7 (1201-1400)				43.59%	66.73%	55.47%	29.55%	38.13%	37.96%	35.96%	40.08%	45.95%	39.86%	39.86%
TIR8 (1401-2800)				44.83%	65.89%	52.88%	25.08%	33.40%	30.27%	28.41%	32.47%	38.63%	34.20%	34.20%
TIR9 (> 2800)				48.26%	66.88%	55.92%	23.93%	32.15%	30.83%	29.98%	34.08%	40.24%	35.58%	35.58%

Commercial - small demands
TIG1	19.20%	34.30%	26.50%	25.55%	52.34%	21.11%	20.53%	28.43%	25.50%	27.13%	31.18%	36.84%	31.40%	32.49%
TIG2	20.70%	43.20%	30.70%	31.97%	58.29%	32.79%	21.42%	29.47%	26.50%	28.19%	32.28%	37.98%	32.60%	33.70%
TIG3				37.57%	65.12%	48.04%	21.63%	29.71%	26.82%	28.44%	32.56%	38.25%	33.05%	34.14%

Commercial - medium demand
T2	31.00%	46.40%	38.90%	36.34%	58.15%	29.47%	0.18%	0.29%	30.81%	30.95%	35.34%	42.54%	37.07%	38.08%

Industrial
T3 low voltage below 300kw	30.10%	47.80%	40.10%	36.48%	58.84	30.53%	27.44%	36.36%	34.58%	34.75%	39.20%	46.38%	41.01%	42.00%
T3 low voltage over 300kw	31.80%	49.90%	42.30%	47.29%	62.29	51.55%	50.58%	50.86%	47.14%	44.99%	51.88%	56.10%	51.56%	52.26%
T3 medium voltage below 300kw	45.00%	60.30%	54.60%	49.06%	65.73	43.51%	43.94%	52.24%	50.73%	50.88%	54.55%	59.73%	55.94%	56.68%
T3 medium volgate over 300kw	47.00%	62.00%	56.80%	56.60%	67.11	59.77%	61.11%	61.31%	58.87%	57.18%	61.99%	64.72%	61.87%	62.32%

Average Tariff	31.50%	44.20%	38.90%	39.60%	63.10%	44.38%	33.69%	40.30%	40.58%	40.35%	45.01%	50.68%	45.93%	46.40%

(1) T1R1 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is less than or equal to 300 KWh. T1R2 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 300 KWh but less than 650 KWh. TIR3 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 650 KWh but less than 800 KWh. TIR4 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 800 KWh but less than 900 KWh. TIR5 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 900KWh but less than 1,000 KWh TIR6 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 1,000 KWh but less than 1,200 KWh. TIR7 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 1,200 KWh but less than 1,400 KWh. TIR8 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 1,400 KWh but less than 2,800 KWh. TIR9 refers to residential users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 2,800KWh. T1G1 refers to commercial users whose peak capacity demand is less than 10kW and whose bimonthly energy demand is less than or equal to 1600 KWh. T1G2 refers to commercial users whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 1600 KWh but less than 4,000 KWh. T1G3 refers to commercial users whose peak capacity demand is greater than 4,000 KWh. T2 refers to commercial users whose peak capacity demand is greater than 10 kW but less than 50 KW. T3 refers to users whose peak capacity demand is equal to or greater than 50 kW. The T3 category is applied to high-demand users according to the voltage (tension) at which each user is connected. Low tension is defined as voltage less than or equal to 1 kV and medium tension is defined as voltage greater than 1kV but less than 66 kV.

(2) On November 7, 2011, the SE issued Resolution No. 1,301/11, which established the summer scheduling, eliminating Argentine Government grants to certain economic activities, which, in accordance with the provisions of the Resolution, are in conditions to pay the actual cost that needs to be incurred for being supplied with their demand of electricity. The removal of Argentine Government grants has been extended to residential users, who were classified by geographical areas and type of residence. The modification related only to electricity purchase prices in the Wholesale Electricity Market, for which reason the Company’s VAD (value added for distribution) remained almost unchanged.

Integral Tariff Revision (RTI).

An integral tariff proposal includes, among other factors, a recalculation of the compensation we receive for our distribution services, including taxes that are not currently passed onto our users (such as taxes on financial transactions), a revised analysis of our distribution costs, modifications to our quality of service standards and penalty scheme and, finally, a revision of our asset base and rate of return.

On April 1, 2016, pursuant to Resolution No. 55/16 issued by ENRE, the RTI process was approved, which set the criteria and methodology to be applied throughout the RTI process, as well as the corresponding working plan.

On September 5, 2016, we submitted our electricity rate schedule proposal for the next five year period. For purposes of the rate proposal, we: determined the capital base using the depreciated NRV method; submitted the 2017-2021 investment plan; submitted a detail of the operating expenses; and submitted all other data requested by the ENRE.

On February 1, 2017, the ENRE issued Resolution No. 63/17 pursuant to which, the ENRE approved a new tariff scheme which set our VAD for the following five-year period. Such income was established by applying the NRV methodology, but over a slightly lower base capital than the one we had submitted in our proposal.

Our operating expenses were determined based on a model that values the resources required for our operations, in line with a “model company” with competent operation costs, including some corrections resulting from the current inefficiencies detected in the Company. In this regard, expenses were calculated annually based on the real network, by incorporating in each year the facilities needed to achieve the quality service required throughout the tariff period, with improvements in the facilities by increasing prevention related maintenance and projected investments. In this regard, the income requirements needed to cover the costs calculated for the 2017-2021 tariff period were established.

In relation to the new tariff schedule and tariff charges, the ENRE established a VAD increase in three stages, including an initial maximum increase of 42% to be applied as from February 1, 2017, and two subsequent increases in November 2017 (19%) and February 2018 (17%). In addition, the ENRE should acknowledge to the Company the difference in VAD resulting from the application of the gradual tariff increase recognized by the RTI in 48 installments as from February 1, 2018,which was incorporated to the VAD value on such date. Furthermore, the fixed charge billing corresponding to Resolution No. 347/12 was set aside.

The ENRE also established a non-automatic mechanism to adjust our tariff, as it had done in the original Concession Contract and the Adjustment Agreement, in order to preserve the economic and financial sustainability of the concession in the event of prices variations in the economy. This mechanism has a six-month basis and includes a combined formula of wholesale and consumer price indexes (WPI, CPI and salaries increases) which trigger the adjustment of tariff when the result is above 5%. In connection with quality standards, the ENRE approved new parameters with the purpose of achieving, by the end of the five-year period an acceptable quality. In this regard, it established a penalties regime to be applied in the event of noncompliance with the quality rates.

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

·	the treatment to be given to the funds received from the Argentine Government through the loans for consumption (mutuums) agreements entered into with CAMMESA for the fulfillment of the Extraordinary Investment Plan, granted to cover the insufficiency of the FOCEDE’s funds;
·	the conditions for the settlement of the outstanding balance with CAMMESA at the date of issuance of SEE Resolution No. 32/15; and
·	the treatment to be given to the penalties and discounts determined by the ENRE, which payment/crediting is pending.

100

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

During the second half of 2017 in several presentations made to the ENRE, the Company submitted for approval purposes, the electricity rate schedules to be applied from August 1, 2017 and from November 1, 2017, related to the variation recorded in the CPD for the January-June 2017 period, and to the second stage increase set forth in Resolution No. 63/17, respectively.

On October 31, 2017, the ENRE, as instructed by the ME&M, postponed to December 1, 2017 the application of the CPD increases abovementioned.

On November 30, 2017, through Resolution No. 603/17 the ENRE established the output PRP and the SPE and transport, as well as the new social tariff methodology and the new incentive schedule for savings, by determining the tariff schedule as of December 1, 2017.

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

On January 31, 2018, the ENRE issued Resolution No. 33/18 whereby it approved the values of CPD, the values of the monthly installment to be applied in accordance with the provisions of ENRE Resolution No. 329/17, and the values of the Company’s electricity rate schedule applicable to consumption recorded as of February 1, 2018. Additionally, it provided that the average electricity rate value amounts to Ps.2.4627 Ps./KWh. Furthermore, such Resolution approved the new CPD adjustments (last stage of 17% according to Resolution No. 63/17, the inflation adjustment of 11.9% for the period July-December 2017 and stimulus factor “E” of -2.51%) and determined the deferred income to be recovered in 48 instalments for a total amount of Ps.8,094.2 million. Additionally, it reported that the value of the average tariff reached Ps.2.4627/KWh.

On December 27, 2018, Resolution No. 366/18 issued by the SGE approved the summer seasonal programming for the WEM submitted by CAMMESA, thus determining new prices for power capacity, energy and transmission for February 2019 to October 2019 period. Furthermore, the social tariff and savings bonuses for the residential tariff were eliminated, as beneficiaries have been transferred to the provincial jurisdictions As of the date of this annual report, the Province of Buenos Aires and the City of Buenos Aires are complying with the payment of the social rate on a regular basis.

On January 31, 2019, ENRE issued Resolution No. 25/19 which approved the values of Edenor’s tariff scheme as from February 1, 2019, incorporated the new power capacity reference prices and stabilized prices for energy determined by the SGE until April 30, 2019. In turn, the ENRE informed that under the transfer of jurisdiction from the Argentine Government to the Province of Buenos Aires and the City of Buenos Aires, the guidelines for the social tariff regime effective as of December 31, 2018 will remain in effect. The Company is currently negotiating the implementation of this benefit in both jurisdictions.

101

Furthermore, the cost of deferrals for August 2018 through February 2019 and for the month of February 2019, totaled Ps.1,005 million and Ps.841 million respectively, and will be paid in 5 installments as from March 2019. Additionally, Ps.51 million will be collected under the same modality due to the partial recognition of the appeal filed by Edenor to Resolution No. 208/18, which acknowledged additional costs not that had not been calculated as part of prior tariffs.

Social Tariff Regime. According to the Adjustment Agreement, we are required to apply a social tariff regime as part of our revised tariff structure resulting from the RTI. This regime is a system of subsidized tariffs for the sectors of the community to be approved by the ENRE in the context of the RTI. The social tariff regime provides sectors of the community with the same service and quality of service as other users. The beneficiaries under this regime must register with the Argentine Government and meet certain criteria, including not owning more than one home and having a level of electricity consumption that is not higher than limit established by the Argentine Government.

In January 2016, pursuant to Resolution No. 6/16, the Argentine Government introduced a social tariff for residential users who comply with certain consumption requirements, which includes a full exemption for monthly consumptions below or equal to 150 KWh and preferential tariffs for users who exceed such consumption level but achieve a monthly consumption lower than that of the same period in the immediately preceding year.

Pursuant to Resolution No. 63/17, the ENRE ratified this measure, maintaining the zero cost modality for monthly consumptions below or equal to 150 KWh and preferential tariffs for consumption that exceeds such level, updating the values in accordance with the new tariff scheme.

Resolution No 603/17 determined a new methodology for social tariff. It established: (1) a 100% discount in the stabilized price of energy for monthly consumptions below or equal to 150 KWh (base consumption); for the monthly consumption above the base consumption, (2) a 50% discount in the stabilized price of energy for the monthly consumptions below or equal 150 KWh; and (3) non-discount for the rest of the surplus consumption. Moreover, a scheme of maximum percentages was established in social tariff user’s invoices with respect to what would be paid, before taxes, by residential users of equal consumption.

On December 27, 2018, the social tariff and savings bonuses for the residential tariff were eliminated by Resolution No. 366/18 issued by the SGE.

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Demand

Energy demand depends to a significant extent on economic and political conditions prevailing from time to time in Argentina, as well as seasonal factors. In general, the demand for electricity varies depending on the performance of the Argentine economy, as businesses and individuals generally consume more energy and are better able to pay their bills during periods of economic stability or growth. As a result, energy demand is affected by Argentine Governmental actions concerning the economy, including with respect to inflation, interest rates, price controls, foreign exchange controls, taxes and energy tariffs.

The following table sets forth the amount of electricity generated in Argentina and our electricity purchases in each of the periods indicated.

Year	Electricity demand in Gwh⁽¹⁾	Edenor demand in Gwh⁽²⁾	Edenor’s demand as % of total demand
2009	104,592	20,676	19.8%
2010	110,767	22,053	19.9%
2011	116,418	23,004	19.8%
2012	131,944	23,933	18.1%
2013	125,162	24,902	19.9%
2014	126,421	24,860	19.7%
2015	131,998	26,322	19.9%
2016	133,111	26,838	20.2%
2017	132,426	25,950	19.6%
2018	132,925	25,906	19.5%
2019	128,880	24,960	19.4%

Source: CAMMESA

(1) Includes demand in the Mercado Eléctrico Mayorista Sistema Patagónico (Patagonia wholesale electricity market, or MEMSP).

(2) Calculated as electricity purchased by us and our wheeling system users.

Beginning in mid-2001 through 2002, the decline in the overall level of economic activity and the deterioration in the ability of many of our users to pay their bills as a result of the crisis led to an overall decrease in demand for electricity and an increase in non-technical energy losses. After the economic crisis, however, demand started growing again, increasing an average of 4.3% per annum from 2003 through 2013. However, the demand for electricity declined 2.5% in 2009 as a consequence of the global financial crisis. This increase in demand was due to renewed growth in the Argentine economy since the second half of 2003 and the relative low cost of energy to consumers, in real terms, resulting from the freeze of our distribution margin and the elimination of the inflation adjustment provisions of our concession in 2002. In 2014, the demand decreased by 2% as a consequence of the depreciation that took place in the second semester of such year, while in 2016 a decrease of 1% was mainly due to the slight contraction in the economic activity of certain sectors, the implementation of rational use strategies by our larger commercial users and to the Industrial Production Index decrease in the case of industrial users, whose joint participation represents more than 50% of the electricity consumption in our concession area. In 2017, the decline in demand was more pronounced, decreasing by 3.6%, in line with the decrease in the demand of the WEMand can be explained by the combination of three factors: economic recession, elasticity to price (in accordance with the tariff increases settled by Resolution No 33/18) and warmer and more uniform average temperatures than in the prior five years. Nevertheless, industrial users, whose participation represents 38% of the electricity consumption, showed the lowest decline in demand, of around 0.4%, in accordance with the recovery of the Industrial Production Index.

In 2019, the demand of electricity amounted to 24,960 GWh, which represented a 3.65% decrease as compared to 2018, whereas the WEM’s demand amounted to 128,880 GWh (-3.04% interannual). The fall in Edenor’s demand was mainly due to temperature, elasticity, the price and the level of the economic activity.

We cannot assure you that the tariffs that result from the RTI or future economic, social and political developments in Argentina, over which we have no control, will not have an adverse effect on energy demand in Argentina. See “Item 3. Key Information—Risk factors—Risks related to the electricity distribution sector—Electricity demand may be affected by tariff increases, which may lead distribution companies, such as us, to record lower revenues.”

103

Capacity demand

Demand for installed capacity to deliver electricity generally increases with growth in demand for electricity. However, since the 2001 and 2002 crisis, with the exception of two thermal generation plants, no new generation plants have been built in Argentina. Despite the lack of new generation plants, the Argentine Government has implemented some economic incentives, such as those in thePlus EnergyProgram, which have served to increase generating capacity in existing generation plants such as Central Térmica Güemes and Central Loma de la Lata. A lack of generation capacity would place limits on our ability to grow and could lead to increased service disruptions, which could cause an increase in our fines. See “Item 3. Key Information—Risk factors—Risks Relating to the Electricity Distribution Sector—If we experience continued energy shortages in the face of growing demand for electricity, our ability to deliver electricity to our users could be adversely affected, which could result in user claims, material penalties, Government intervention and decreased results of operations.”

In response to the lack of private investment in new generation plants, the Argentine Government undertook a project to construct two 800 MW thermal generation plants, Central Termoeléctrica Manuel Belgrano and Central Termoeléctrica General San Martín. Construction of these two plants was completed and operations commenced in 2009. The two plants were constructed with funds derived from three sources: net revenues of generators derived from energy sales in the spot market, a special charge to our non-residential users per MWh of energy billed and a specific charge from CAMMESA applicable to large users. In addition to the construction of these two new thermal generation plants, in September 2006 the SE issued Resolution No. 1,281/06 in an effort to respond to the sustained increase in energy demand following Argentina’s economic recovery after the crisis. This resolution aims to create incentives for energy generation plants to meet increasing energy needs. The Government has also required us to finance 24% and Edesur 26%, of the construction costs of two high-tension 220 kV lines between theCentral Puerto andCentral Costanera generators and theMalaver network, which provide access to an additional 600MW of energy from theCentral Puerto andCentral Costanera generators that currently cannot be distributed due to saturation of their grids. In May 2012, we finished the construction of the 220kV linking lines of the local generators Central Puerto and Central Costanera with Edenor network, through Malaver substations. This extension pursuant to Resolution No. 1,875/05 of the SE permitted an increase in supply capacity by 600 MW from Central Puerto and Central Costanera generators. In December 2012, the third transformer of 300 MVA-220/132 kV was put into service in Malaver’s substation.

During January 2017, a new temporary 500/132 kV transformer of 300 MVA was installed in SE Rodríguez, which allowed the entry of more power from the WEM. This transformer was replaced by a definitive one of 500 MVA during 2018. In addition, during 2017 a new type of thermal generation (by means of transportable modules) has been directly connected to Edenor’s high voltage network, with an aim to decrease the saturation of these networks: CT Zappalorto (APR), CT Pilar (Pampa Energía S.A.), CT Matheu II (APR). In 2018, CT Matheu III (Araucaria) was began operating and a new 220/132 kV transformer of 300 MVA was installed in SE Ezeiza.

We cannot assure you that these new generation plants will be able to serve our energy demands in the manner we anticipate.

Seasonality of Demand

Seasonality has a significant impact on the demand for electricity in our concession area, with electricity consumption peaks in summer and winter. The impact of seasonal changes in demand is registered primarily in our residential and small commercial user categories. The seasonal changes in demand are attributable to the impact of various climatological factors, including weather and the amount of daylight time, on the usage of lights, heating systems and air conditioners.

The impact of seasonality on industrial demand for electricity is less pronounced than on the residential and commercial sectors, primarily because different types of industrial activity by their natur

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Empresa Distribuidora y Comercial Norte (EDN) 20-F2019 FY Annual report (foreign)

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