Metrogas 20F 2010 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2010
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of event requiring this shell company report ____________
For the transition period from ____________ to ____________

Commission file number 1-12796

METROGAS S.A.
(Exact name of Registrant as specified in its charter)

METROGAS Inc.
(Translation of Registrant's name into English)

Republic of Argentina
(Jurisdiction of incorporation or organization)

Gregorio Araoz de Lamadrid 1360
(1267) Buenos Aires, Argentina
(Address of principal executive offices)

Eugenia Gatti
(egatti@metrogas.com.ar) (54) (11) 4309-1381
Gregorio Araoz de Lamadrid 1360 - (1267) Buenos Aires, Argentina
(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 Name of each exchange on which registered
American Depositary Shares, Representing Class B Ordinary Shares New York Stock Exchange
Class B Ordinary Shares, nominal value Ps1.00 per share Buenos Aires Stock Exchange

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: None

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:
Class A Ordinary Shares, nominal value Ps. 1.00 per share: 290,277,316
Class B Ordinary Shares, nominal value Ps. 1.00 per share: 221,976,771
Class C Ordinary Shares, nominal value Ps. 1.00 per share: 56,917,121

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

¨ Yesþ No

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

¨ Yesþ No

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.

þ Yes¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

¨ Yes¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

¨ Large accelerated filer¨ Accelerated filerþ Non -accelerated filer

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 Board

þ 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 17þ Item 18

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

¨ Yesþ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court:

¨ Yes¨ No

Table of Contents

Page

Part I*

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS*

ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE*

ITEM 3.KEY INFORMATION*

A.Selected Consolidated Financial Data*

B.Capitalization and Indebtedness*

C.Reasons for the Offer and Use of Proceeds*

D.Risk Factors*

ITEM 4.INFORMATION ON THE COMPANY*

A.History and Development of the Company*

B.Business Overview*

C.Organizational Structure*

D.Property, Plants and Equipment*

ITEM 4A.UNRESOLVED STAFF COMMENTS*

ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS*

A.Operating Results*

B.Liquidity and Capital Resources*

C.Research and Development, Patents and Licenses*

D.Trend Information*

E.Off-Balance Sheet Arrangements*

F.Tabular Disclosure of Contractual Obligations*

G.Safe Harbor*

ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES*

A.Directors and Senior Management*

B.Compensation*

C.Board Practices*

D.Employees*

E.Share Ownership*

ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS*

A.Major Shareholders*

B.Related Party Transactions*

C.Interests of Experts and Counsel*

ITEM 8.FINANCIAL INFORMATION*

A.Consolidated Statements and Other Financial Information*

ITEM 9.THE OFFER AND LISTING*

A.Offer and Listing Details*

B.Plan of Distribution*

C.Markets*

D.Selling Shareholders*

E.Dilution*

F.Expenses of the Issue*

ITEM 10.ADDITIONAL INFORMATION*

A.Share Capital*

B.Memorandum and Articles of Association*

C.Material Contracts*

D.Exchange Controls*

E.Taxation*

F.Dividends and Paying Agents*

G.Statement by Experts*

H.Documents on Display*

I.Subsidiary Information*

ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK*

ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES*

A.Debt Securities*

B.Warrants and Rights*

C.Other Securities*

D.American Depositary Receipts*

Part II*

ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES*

ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS*

ITEM 15.CONTROLS AND PROCEDURES*

ITEM 16.[Reserved]*

ITEM 16A.Audit Committee Financial Expert*

ITEM 16B.CODE OF ETHICS*

ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES*

ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES*

ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS*

ITEM 16F.CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT*

ITEM 16G.CORPORATE GOVERNANCE*

Part III*

ITEM 17.FINANCIAL STATEMENTS*

ITEM 18.FINANCIAL STATEMENTS*

ITEM 19.EXHIBITS*

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This annual report on Form 20-F, or our "annual report," contains certain "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act." Some of these forward-looking statements include forward-looking phrases such as "anticipates," "believes," "could," "estimates," "expects," "foresees," "intends," "may," "should" or "will continue," or similar expressions or the negatives thereof or other variations on these expressions, or similar terminology, or discussions of strategy, plans or intentions. These statements also include descriptions in connection with, among other things:

the renegotiation of the terms of our license and tariffs with the Argentine Government;

anticipated revenues, capital expenditures, cash flows and financing requirements;

economic and political developments in Argentina, foreign exchange restrictions on payments abroad, as well as actions by theEnte Nacional Regulador del Gas (the National Gas Regulatory Board, or the "ENARGAS"), the Argentine regulatory agency with jurisdiction over us, and other governmental authorities that may affect us;

the effects of inflation and currency volatility on our financial condition and results of operations;

the implementation of our business strategy;

descriptions of new services and anticipated demand for services and other changes in rates and tariff regulations and charges for gas services;

descriptions of the expected effects of our competitive strategies; and

the impact of actions taken by our competitors and other third parties, including courts and other governmental authorities.

Such statements reflect our current views regarding future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements that forward-looking statements may express or imply, including:

the economic and political instability of Argentina;

changes in inflation;

fluctuations in the currency exchange rates between the Argentine Peso and foreign currencies;

changes in financial and natural gas regulation;

the current gas and electricity supply bottleneck affecting Argentina and the impact of emergency laws and regulations enacted or proposed by the Argentine Government;

revocation of our license, as defined below to provide gas services;

our ability to successfully cancel our indebtedness or refinance our financial obligations when they become due;

the outcome of pending legal claims against us; and

the matters discussed under "Risk Factors."

Some of these factors are discussed in more detail in our annual report, including under Item 3: "Key Information-Risk Factors," Item 4: "Information on the Company" and Item 5: "Operating and Financial Review and Prospects." If one or more of these risks or uncertainties affects future events and circumstances or if underlying assumptions do not materialize, actual results may vary materially from those described in our annual report as anticipated, believed, estimated or expected. We have no plans to update any industry information or forward-looking statements set out in our annual report and have no obligation to update any such statements.

INTRODUCTION AND USE OF CERTAIN TERMS

In this document, any reference to "we," "our," "ours," and "us" means MetroGAS S.A.

In this annual report, references to "US$," "U.S. Dollars" and "Dollars" are to United States Dollars and references to "Ps.," "Pesos" or "$" are to Argentine Pesos. References to "Euros" are to the currency of the European Economic and Monetary Union. Percentages and some currency amounts in our annual report were rounded for ease of presentation. Any reference to the "Government" or the "Argentine Government" is to the government of the Republic of Argentina.

In addition, references to "billions" are to thousands of millions. References to "CM" are to cubic meters, to "MCM" are to thousands of cubic meters, to "MMCM" are to millions of cubic meters and to "BCM" are to billions of cubic meters. References to "CF" are to cubic feet, to "MCF" are to thousands of cubic feet, to "MMCF" are to millions of cubic feet and to "BCF" are to billions of cubic feet. One cubic meter equals 35.3145 cubic feet. References to "BTU" are to British thermal units and to "MMBTU" are to millions of British thermal units. A BTU is the amount of heat needed to increase the temperature of one pound of water by one degree Fahrenheit (252 calories). Although BTU is a calorific measurement and does not correspond exactly to volume measurements, in calculating our gas purchase requirements we estimate that one cubic foot (0.03 CM) of gas provides one thousand BTUs. References to "km" are to kilometers.

PRESENTATION OF FINANCIAL INFORMATION

This annual report contains our audited consolidated financial statements as of December 31, 2010 and 2009 and for the fiscal years ended December 31, 2010, 2009 and 2008 and the notes thereto, or our "Annual Consolidated Financial Statements", which have been audited by Price Waterhouse & Co. S.R.L. (member firm of PricewaterhouseCoopers), Buenos Aires, Argentina ("pwc"), an independent registered public accounting firm, whose report dated April 28, 2011 is included elsewhere herein. See Item 18: "Financial Statements." Our Annual Consolidated Financial Statements are presented in Pesos and are prepared in accordance with generally accepted accounting principles used in Argentina, or "Argentine GAAP". Significant differences exist between Argentine GAAP and generally accepted accounting principles used in the United States, or "U.S. GAAP," which might be material to the financial information contained herein. Such differences involve methods of measuring the amounts shown in our Annual Consolidated Financial Statements as well as additional disclosures required by U.S. GAAP and Regulation S-X of the United States Securities and Exchange Commission, or "SEC." See Notes 17 and 18 to our Annual Consolidated Financial Statements for a description of the principal differences between Argentine GAAP and U.S. GAAP as they relate to us and for reconciliation to U.S. GAAP of our net income (loss) and shareholders' equity.

Our Annual Consolidated Financial Statements have been prepared assuming that we will continue as a going concern. Our independent auditors, pwc, issued a report dated April 28, 2011 on our financial statements as of and for the years ended December 31, 2010 and 2009, which contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern. Note 2 of the financial statements discloses that the suspension of the original regime for tariff adjustments and the inability to generate sufficient cash flows to pay our financial debt obligations led us to file a petition for a voluntary reorganization proceeding (concurso preventivo) in an Argentine court on June 17, 2010. This reorganization filing generated an event of default under the outstanding debt obligations. Pursuant to the terms of our outstanding debt obligations, this default resulted in the automatic acceleration of our outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on our outstanding debt obligations. As of the date of this annual report, it is not possible to predict the outcome of this reorganization proceeding. These circumstances raise substantial doubt about our ability to continue as a going concern. However, our financial statements as of and for the year ended December 31, 2010 and 2009 do not include any adjustments or reclassifications that might result from the outcome of this uncertainty. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Us-Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors have issued an opinion that contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern." See Item 18: "Financial Statements."

This annual report also contains certain amounts and ratios (including percentage amounts) that have been rounded up or down for ease of presentation. The effect of such rounding is not material. Such amounts, as so rounded, are also used in the text of our annual report. Accordingly, numerical figures shown as totals in tables may not be an arithmetic aggregation of the figures that preceded them.

In addition, our financial statements use the exchange rate as of each relevant date or period-end quoted byBanco de la Nación Argentina, or "Banco Nación." In the case of U.S. Dollars, Banco Nación quotes for such exchange rates were Ps. 1.00 per US$ 1.00 until December 23, 2001. From December 24, 2001 to January 10, 2002, the exchange market was officially suspended. On January 10, 2002, the Argentine Government established a dual exchange rate system. The exchange rate in the free market began to float for the first time since April 1991. On January 10, 2002, the free market rate was Ps. 1.70 per US$ 1.00 while the official market rate was Ps. 1.40 per US$ 1.00. On February 8, 2002, the Argentine Government repealed the dual exchange rate, and since February 11, 2002, Argentina has had one freely floating exchange rate for all transactions. As of December 31, 2010, the only exchange market available was the free market and the quotation was Ps. 3.9760 per US$ 1.00 and as of April 25, 2011 the exchange rate was Ps. 4.0820 per US$ 1.00. The reader should not construe the translation of currency amounts in our annual report to be representations that the Peso amounts actually represent U.S. Dollar amounts or that any person could convert the Peso amounts into U.S. Dollars at the rate indicated or at any other exchange rate. See Item 3: "Key Information-Exchange Rates Information" for information regarding exchange rates.

The contents of our website are not part of our annual report.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

KEY INFORMATION

Selected Consolidated Financial Data

The following tables set forth our selected consolidated financial and operating data as of and for the years ended December 31, 2010, 2009, 2008, 2007 and 2006, respectively. Our financial and operating data should be read in conjunction with, and are qualified in their entirety by, our Annual Consolidated Financial Statements, the notes related thereto and the information contained in Item 5: "Operating and Financial Review and Prospects."

We maintain our financial books and records and publish our financial statements in constant Pesos as of February 28, 2003, and prepare our consolidated financial statements in conformity with Argentine GAAP. Significant differences exist between Argentine GAAP and U.S. GAAP that might be material to the financial information contained herein. Such differences involve methods of measuring the amounts shown in our Annual Consolidated Financial Statements as well as additional disclosures required by U.S. GAAP and Regulation S-X of the Exchange Act. See Notes 17 and 18 to our Annual Consolidated Financial Statements for a description of the principal differences between Argentine GAAP and U.S. GAAP as they relate to us and reconciliation to U.S. GAAP of our net income (loss) and shareholders' equity.

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

	For the year ended December 31,
	2010⁽¹⁾	2010	2009		2008	2007	2006
	(in thousands of US$, except ratios and shares)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Argentine GAAP
Gross sales(a)	282,276	1,122,328	1,074,227	901,564		955,853	873,893
Net sales(b)	271,708	1,080,312	1,039,691	871,961		924,777	845,127
Gross profit(c)	78,758	313,140	304,643	288,611		284,071	248,310
Operating income	14,203	56,472	94,086	117,238		122,724	112,261
Financing and holding results gains (loss) (d)	(36,907)	(146,741)	(170,786)	(130,144)		(114,302)	332,282
Income (loss) before income tax	(21,258)	(84,523)	(68,950)	(11,743)		11,233	445,576
Net income (loss)	(18,032)	(71,697)	(78,342)	(13,549)		15,787	292,553
Weighted average number of shares outstanding	569,171	569,171	569,171	569,171		569,171	569,171
Income (loss) per share	(0.03)	(0.13)	(0.14)	(0.02)		0.03	0.51
Dividends per share	-	-	-	-		-	-
Income (loss) per ADS	(0.32)	(1.26)	(1.38)	(0.24)		0.28	5.14
Dividends per ADS	-	-	-	-		-	-
U.S. GAAP
Net sales(b)	271,708	1,080,312	1,039,691	871,961		924,777	845,193
Gross profit(c)	68,190	271,124	270,107	259,008		252,995	219,610
Operating income	17,988	71,521	80,067	99,387		115,543	93,780
Financing and holding results gains (loss) (d)	35,626	141,647	(121,492)	(87,842)		(59,276)	(105,486)
Income (loss) before income tax	55,059	218,915	(33,675)	12,708		59,078	(9,192)
Net income (loss)	51,013	202,826	(188.448)	19,075		93,108	109,128
Earnings (loss) per share	0.090	0.356	(0.331)	0.034		0.164	0.192
Earnings (loss) per ADS	0.896	3.564	(3.311)	0.335		1.636	1.917

CONSOLIDATED BALANCE SHEET DATA:
Argentine GAAP
Fixed assets (net of depreciation)	433,319	1,722,877	1,688,430	1,661,201		1,653,273	1,674,400
Total assets	631,514	2,510,900	2,225,735	2,098,572		2,006,981	2,032,837
Net current liabilities(e)	18,487	73,503	(163,635)	(42,631)		(47,504)	(72,569)
Total financial debt	-	-	920,634	815,327		736,807	730,977
Short-term financial debt	-	-	82,777	2,202		5,809	20,291
Long-term financial debt	-	-	837,857	813,125		730,998	710,686
Reorganization liability	306,924	1,220,331	-	-		-	-
Total shareholders' equity	207,722	825,904	897,601	975,943		989,492	973,705
Number of shares	569,171	569,171	569,171	569,171		569,171	569,171
Total capitalization(f)	514,647	2,046,235	1,818,235	1,791,270		1,726,299	1,704,682
U.S. GAAP
Total shareholders' equity	107,799	428,607	225,781	414,229		395,154	302,046

OTHER CONSOLIDATED FINANCIAL DATA:
Argentine GAAP
Acquisition of fixed assets(g)	29,957	119,111	105,756	84,169		62,944	48,915
Depreciation and amortization	18,718	74,421	71,331	69,168		71,800	71,885
Nominal gross interest(h)	8,459	33,632	69,717	59,184		58,168	82,748
Interest income	1,304	5,185	11,580	13,567		8,941	13,261
Net interest expense(i)	7,155	28,447	58,137	45,617		49,227	69,487
EBITDA(j)	34,366	136,640	173,167	187,569		197,335	185,179
Net cash flows provided by operating activities	76,007	302,205	251,480	172,384		118,334	170,237

Notes:

(1) Solely for the convenience of the reader, we have translated Argentine Peso amounts into U.S. Dollars at the exchange rate quoted by Banco Nación for December 31, 2010, which was Ps. 3.9760 per US$ 1.00. We make no representation that the Argentine Peso or U.S. Dollar amounts actually represent, could have been or could be converted into Dollars at the rates indicated, at any particular rate or at all. See Item 3: "-Exchange Rates Information."

	For the year ended December 31,
	2010	2009	2008	2007	2006
	(in thousands of Pesos, except ratios and shares)
SELECTED CONSOLIDATED FINANCIAL RATIOS:

Argentine GAAP
Liquidity ratio (current assets/current liabilities)	115.9%	65.8%	85.2%	80.8%	76.4%
Solvency ratio (shareholders' equity/total liabilities)	49.1%	67.7%	87.0%	97.3%	92.0%
Fixed assets ratio (fixed assets/total assets)	68.6%	75.9%	79.2%	82.4%	82.4%
Net income margin (net income/sales)	(6.4%)	(7.3%)	(1.5%)	1.7%	33.5%
Total financial debt/total capitalization	0.0%	50.6%	45.5%	42.7%	42.9%

Ratio of:
EBITDA to nominal gross interest	4.1x	2.5x	3.2x	3.4x	2.2x
EBITDA to net interest expense(h)	4.8x	3.0x	4.1x	4.0x	2.7x
Operating cash flow to nominal gross interest	9.0x	3.6x	2.9x	2.0x	2.1x
Short-term debt to operating cash flow	-	0.3x	0.0x	0.0x	0.1x

Selected Operating Data:
Total number of customers	2,209,959	2,176,327	2,144,612	2,101,733	2,060,130
Residential	2,128,126	2,094,606	2,063,795	2,021,807	1,982,192
Other	81,833	81,721	80,817	79,926	77,938
Kilometers of pipeline	16,493	16,264	16,190	16,100	16,016
Total number of employees	1,039	1,052	1,021	1,014	1,012

	Year Ended December 31,
	2010		2009		2008		2007		2006
	MMCM	MMCF	MMCM	MMCF	MMCM	MMCF	MMCM	MMCF	MMCM	MMCF
Volumes Transported:(k)
Average daily firm
transportation capacity	24.6	868.7	24.6	868.7	24.6	868.7	24.6	868.7	24.6	868.7
Average daily volume	22.6	798.1	23.6	833.4	23.8	841.1	24.6	868.7	24.3	857.8
Firm (including residential)	13.0	459.1	13.1	462.6	13.4	473.2	13.9	490.9	12.7	448.6
Interruptible	9.7	342.6	10.5	370.8	10.4	367.3	10.7	377.9	11.6	409.2
Load factor(l)	92.1%		95.8%		96.8%		100%		96.8%

Volumes Delivered:
Average daily volume	21.6	762.8	22.6	798.1	22.9	808.7	23.8	840.5	23.4	826.4
Firm (including residential)	12.4	437.9	12.5	441.4	12.9	455.6	13.4	473.2	12.2	430.8
Interruptible	9.2	324.9	10.1	356.7	10.0	353.1	10.4	367.3	11.1	395.6

Notes:

(a) Represents gross revenues.

(b) Represents gross revenues less turnover tax.

(c) Under Argentine GAAP, gross profit is defined as sales less operating costs, which exclude administrative, selling and other expenses.

(d) Includes mainly exchange differences from our foreign currency-denominated assets and liabilities, results of exposure to inflation, holding results, interest income from our interest-bearing assets, interest expense from our outstanding debt, gain on debt restructuring and gain on present-valuing long term financial debt.

(e) Current assets minus current liabilities.

(f) Total Reorganization Liability to refinance (included financial debt) plus total shareholders' equity.

(g) Represents additions (excluding materials) and transfers to property, plant and equipment.

(h) Interest on financial operations (no interest was capitalized during 2006, 2007, 2008, 2009 and 2010).

(i) Nominal gross interest plus capitalized interest less interest income.

(j) EBITDA means earnings before interest, taxes, depreciation and amortization. However, we calculate EBITDA as earnings before financial and holding results, income taxes, depreciation and amortization. Financing and holding results includes but is not limited to interest expense. Financing and holding results also include interest income, exchange results, holding results, results of debt restructuring, results from the present-valuing of long term financial debt and others. We believe EBITDA provides investors with meaningful information with respect to our operating performance and facilitates comparisons to our historical operating results. Our EBITDA measure has limitations as an analytical tool, however, and you should not consider it in isolation, as an alternative to net income or as an indicator of our operating performance or as a substitute for analysis of our results as reported under Argentine GAAP or U.S. GAAP. Some of these limitations include:

(1) it does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

(2) it does not reflect changes in, or cash requirements for, our working capital needs;

(3) it does not reflect our interest expense, or the cash requirements to service the interest or principal payments of our debt;

(4) it does not reflect any cash income taxes or employees' profit sharing we may be required to pay;

(5) it reflects the effect of non-recurring expenses, as well as investing gains and losses;

(6) it is not adjusted for all non-cash income or expense items that are reflected in restatements of changes in financial position; and

(7) other companies in our industry may calculate this measure differently than we do which may limit its usefulness as a comparative measure.

Because of these limitations, our EBITDA measure should not be considered a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations. EBITDA is not a recognized financial measure under Argentine GAAP or U.S. GAAP. You should compensate for these limitations by relying primarily on our Argentine GAAP results and using our EBITDA measurement supplementally.

(k) Volumes transported exceed volumes delivered primarily due to gas losses occurring in the distribution system.

(l) Represents the daily average volume of gas transported under firm transportation contracts divided by the daily firm transportation capacity under such contracts.

RECONCILIATION OF EBITDA:	For the year ended December 31,
	(in thousands of US$)	(in thousands of Pesos)
	2010⁽¹⁾	2010	2009	2008	2007	2006
Net cash provided by operating activities	76,007	302,205	251,480	172,384	118,334	170,237
Financing and holding results (not using funds)	7,955	31,630	63,170	50,310	55,767	77,377
Net book value of fixed assets written off	(396)	(1,574)	243	(1,271)	(983)	(4,781)
Allowance for doubtful accounts	(1,754)	(6,973)	(8,174)	(1,259)	(2,285)	(2,165)
Allowance for inventory obsolescence	(11)	(43)	(167)	(140)	(725)	(10)
Disposal of fixed assets	(2,158)	(8,581)	(7,439)	(5,767)	(11,280)	(3,807)
Contingencies reserve	(2,380)	(9,464)	(10,445)	(12,702)	(11,397)	(7,950)
Materials consumed	(997)	(3,966)	(8,009)	(2,728)	(1,732)	(2,062)
Minority interest	(65)	(258)	(298)	(245)	(346)	(365)
Changes in assets and liabilities	(41,835)	(166,336)	(107,194)	(11,013)	51,982	(41,295)

EBITDA	34,366	136,640	173,167	187,569	197,335	185,179

Notes:

(1) Solely for the convenience of the reader, we have converted Argentine Peso amounts into U.S. Dollars at the exchange rate quoted by Banco Nación for December 31, 2010, which was Ps. 3.9760 per US$ 1.00. We make no representation that the Argentine Peso or U.S. Dollar amounts actually represent, could have been or could be converted into Dollars at the rates indicated, at any particular rate or at all. See Item 3: "-Exchange Rates Information."

Exchange Rates Information

The following table sets forth, for the periods indicated, the period-end, average, low and high rates for the purchase of U.S. Dollars, expressed in Pesos per U.S. Dollar. On December 31, 2010, the Peso/U.S. Dollar exchange rate was Ps. 3.9760 per US$ 1.00. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos.

	Observed Exchange Rates (Ps. Per US$)
	Observed Exchange Rates (Ps. Per US$)
Year Ended December 31,	High (a)	Low (b)	Average (c)	Period End

2006	3.1070	3.0300	3.0746	3.0620
2007	3.1800	3.0580	3.1162	3.1490
2008	3.4680	3.0140	3.1633	3.4530
2009	3.8540	3.4490	3.7299	3.8000
2010	3.9880	3.7940	3.9130	3.9760
Month Ended November 30, 2010	3.9880	3.9570	3.9700	3.9880
Month Ended December 31, 2010	3.9860	3.9720	3.9770	3.9770
Month Ended January 31, 2011	4.0080	3.9320	3.9804	4.0080
Month Ended February 28, 2011	4.0390	4.0090	4.0230	4.0290
Month Ended March 31, 2011	4.0540	4.0280	4.0140	4.0540
As of April 25, 2011	4.0820	4.0500	4.0619	4.0820

Notes:

(a) The high rate shown was the highest month-end rate during the year or any shorter period, as noted.

(b) The low rate shown was the lowest month-end rate during the year or any shorter period, as noted.

Source: Banco Nación.

Capitalization and Indebtedness

Not Applicable.

Reasons for the Offer and Use of Proceeds

Not Applicable.

Risk Factors

Risk Factors

You should carefully consider all of the information set forth in this annual report and the following risk factors. The risks below are not the only ones we face. Additional risks not currently known by us may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This annual report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this annual report.

Risk Factors Relating 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, assets and customers are located in Argentina. Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic, regulatory and political conditions prevailing in Argentina. For example, lower economic growth or economic recession could lead to lower demand for gas in our concession area or a decline in purchasing gas by our customers, which, in turn, could lead to lower collections from our clients. Argentine Government actions concerning the economy, including decisions with respect to inflation, interest rates, price controls, foreign exchange controls and taxes, have led and could continue to lead to a deterioration of the operational and financial condition of private sector entities, including us. The economic measures taken by the Argentine Government are aimed at short term objectives. The lack of medium and long term policies in infrastructure negatively affects our business prospects. We cannot provide any assurance that future economic, social and political developments in Argentina, over which we have no control, will not impair our business, financial condition or results of operations.

Argentina's current economic growth and stability may not be sustainable

In 2001 and 2002, Argentina suffered an unprecedented economic, political and social crisis which, among other things, put an end to the Convertibility Regime that had maintained the Peso/U.S. dollar exchange rate fixed at 1 to 1 and inflation at bay. In response to this crisis, the Federal Government introduced a series of measures that affected many sectors of the economy and paved the way for a broader intervention by the government in the economy. Supported by a simultaneous increase in international commodity prices, the competitive advantages resulting from the devaluation of the Peso resulted in a swift recovery of the Argentine economy as imports were substituted with local production and export revenues increased significantly. The Federal Government's financial condition also improved as it increased its revenues primarily as a result of enforcement of export duties. A significant portion of the revenues raised was used by the Federal Government to appease social unrest (through subsidies, social welfare programs, and other measures). However, while the economy recovered significant in 2010, reaching a GDP growth rate of 9.2, uncertainty remains as to whether the current growth and relative stability are sustainable.

Sustainable economic growth depends on several factors, including the international demand for Argentine exports, improved competitiveness of Argentine producers and industries, and, generally, the confidence of foreign and domestic investors and a stable and relatively low inflation rate. The Argentine economy remains unstable for the following reasons, among others:

high commodity prices in the international market, which are volatile, beyond the control of the country, as evidenced by the considerable decrease that followed the global financial crisis in 2009; and

the availability of excess production capacity, which has been reduced considerably;

inflation rates have risen and threaten to increase even more;

the regulatory environment continues to be uncertain;

the availability of long-term credit remains limited;

the domestic saving and investment as a percentage of GDP remains too low to sustain current growth rates;

the Federal Government's current fiscal surplus has been decreasing as a percentage of GDP and could turn into a fiscal deficit;

Argentina has not yet completed the restructuring of its defaulted public debt and international financing is limited;

labor disputes and/or strikes have increased, affecting several sectors of the Argentine economy; and

the supply of energy may not be sufficient to satisfy an expansion of economic activity in the country.

If Argentina experiences another recession or crisis, this may have a material adverse effect on our business and our financial condition.

The Argentine economy could be adversely affected by local political developments.

During 2011, presidential, congressional, and gubernatorial elections are all scheduled to take place in Argentina. In recent presidential elections, the Argentine securities markets have experienced volatility that has been attributed to uncertainty regarding the new government's economic policy. In addition, congressional and local gubernatorial races may result in changes to fiscal and economic regimes and social policies. There are no assurances that uncertainties preceding or resulting from the 2011 elections will not negatively impact the Argentine economy or its securities markets, and as a consequence our financial condition or results of operations.

Argentina's ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth.

In December 2001, the Argentine Government declared a moratorium on a substantial portion of Argentina's public debt (US$ 89.1 billion at the time). After a process of negotiation with the creditors of the Argentine Government, on December 9, 2004 Executive Decree No. 1,735/04 was issued, approving the offer for the restructuring of the defaulted public debt. As a result, 76.15% of investors exchanged their defaulted debt for new securities with a longer term maturity pursuant to the terms of the restructuring. Following such process, the Argentine Government announced the total gross public debt as of December 31, 2005 amounted to approximately US$ 129.2 billion. The decrease was also driven by the fact that the total debt figures since 2005 exclude the debt on securities that were eligible for, but did not participate in, the 2005 exchange offer.

On January 3, 2006, Argentina prepaid its whole outstanding debt to the International Monetary Fund, which amounted to US$ 9.8 billion, using the Central Bank's reserves in excess of the amount necessary to support 100% of the Argentine monetary base.

Additionally, foreign shareholders of several Argentine companies, including public utilities and a group of bondholders that did not participate in the 2005 sovereign debt restructuring, have filed claims totaling approximately US$16.5 billion before the International centre for Settlement of Investment Disputes ("ICSID") alleging that certain government measures were inconsistent with the fair and equitable treatment standards set forth in various bilateral investment treaties to which Argentina is a party. To date, ICSID has rendered several decisions against Argentina requiring the Argentine government to pay approximately US$913 million plus interest in claims and legal fees. Argentina applied for the annulment of these awards under Chapter VII of the ICSID Arbitration Rules. Separately, in relation to the same subject, the UN Commission on International Trade Law ("UNCITRAL") has, as of the date hereof, issued two awards, ordering the Argentine Government to pay US$238 million plus interest and costs. Argentina also sought annulment of these two awards, but during 2010 both motions for annulment were rejected by U.S. federal courts. Furthermore, a group of holders that did not participate in the restructuring of Argentina's public debt has filed an arbitration request before ICSID for the sum of US$ 4.4 billion.

In 2010, the Argentine government began the process of restructuring its public debt, leading it to commence an SEC-registered exchange offer for its untendered debt. Following the restructuring of the defaulted public debt, on April 15, 2010, the Argentine Minister of Economy and Public Finance announced the main terms of the debt exchange being made to the hold-outs of the 2005 exchange offering, which represent 24% of the outstanding debt of Argentina. The results of the April 2010 exchange offer were announced in June 2010 with 66% of the hold-outs having accepted.

In regards to other debt commitments, at the end of 2010, President Fernandez de Kirchner announced a new start in the negotiations to cancel Argentina's debt with the Paris Club. Such debt amounts to approximately US $8 billion. Such negotiation is presently being carried out by the Ministry of Economy and Public Finance and its terms and conditions have not been made public.

The condition of Argentina after the default on its debt and the fact that its outstanding external debt has not been restructured in its entirety and hold-out creditors' claims have not fully settled, might limit Argentina's capacity to gain access to international capital markets. The lawsuits instituted and the claims brought before the ICSID and UNCITRAL by hold-out creditors may give rise to significant decisions unfavorable to the Argentine Government, which may result in attachments or restraining orders issued against Argentine assets that the Argentine Government intended to use for other purposes. Therefore, the Argentine Government might possibly not have available the financial resources necessary to implement reforms and promote growth, which might have a material adverse effect on the Argentine economy and consequently on our businesses. In addition, Argentina's lack of capacity to obtain credit in international markets might have an adverse effect on our capacity to access international credit markets in order to finance their operations and growth.

The devaluation of the Peso, the pesification and freezing of our tariffs, and the macroeconomic conditions currently prevailing in Argentina have had, and may continue to have, a material adverse effect on our results of operations and financial condition.

In 2002, the Public Emergency Law put an end to ten years of U.S. Dollar-Peso parity and authorized the Argentine Government to set the exchange rate between the Peso and other currencies. The Argentine Government initially established a dual exchange rate of Ps. 1.40 per U.S. Dollar for certain transactions and a free-floating rate for all other transactions. This dual system was later eliminated in favor of a single free-floating exchange rate for all transactions. Since the floating of the Peso, the Peso has fluctuated significantly, causing the Central Bank to intervene in the market to limit changes in the value of the Peso by selling U.S. Dollars and, lately, by buying U.S. Dollars. As of April 15, 2011, the exchange rate was Ps. 4.0700 per US$ 1.00. See Item 3: "-Exchange Rates Information" for additional information regarding Peso/U.S. Dollar exchange rates.

We cannot assure you that future policies adopted by the Argentine Government will be able to limit the volatility of the Peso and, therefore, the Peso could be subject to significant fluctuations which could materially and adversely affect our financial condition and results of operations. Peso-denominated tax revenues constitute the majority of the Argentine Government's tax receipts and, notwithstanding their nominal increase due to inflation, tax revenues have decreased in total U.S. Dollar terms. Therefore, the Argentine Government's ability to honor its foreign debt obligations has been materially and adversely affected by the devaluation of the Peso.

We derive substantially all of our revenues in Pesos from our activities in Argentina and, as a result, the devaluation of the Peso and the pesification and freezing of our tariffs have had a material adverse effect on our ability to service our indebtedness, which is largely denominated in foreign currency and has significantly increased in Peso terms. In addition, the Peso cost of approximately 4.7% of our expenses denominated in foreign currency and of our imported goods (including capital goods) increased due to the devaluation. Furthermore, the devaluation of the Peso has had a material adverse effect on our financial condition as the Peso-denominated book value of our assets has not increased at the same rate as has the Peso-denominated book value of our largely foreign currency-denominated indebtedness. Any further depreciation of the Peso against the U.S. Dollar will correspondingly increase the amount of our debt in Pesos, with further adverse effects on our results of operations and financial condition. As of December 31, 2010, our nominal financial debt in foreign currency was the equivalent of US$ 260.2 million. (Dollar/Euro rate = 1.3261).

We cannot predict whether, and to what extent, the Peso may further devalue against the U.S. Dollar and how those currency movements may affect consumption of gas services. Moreover, we cannot predict whether the Argentine Government will further modify its monetary policy and, if so, what impact these changes may have on our financial condition and results of operations.

Restrictions on Argentina's energy supplies could negatively affect Argentina's economic activity

As a result of several years of recession, the forced conversion into Pesos at the one-to-one exchange rate, which led to a significant devaluation of the Peso, and the subsequent freeze of gas and electricity tariffs and the significant devaluation of the Peso, there has been a lack of investment in gas and electricity supply and transport capacity in Argentina in recent years. At the same time, demand for non-liquified natural gas and electricity has increased substantially in 2009 and 2010, driven by a recovery in economic conditions and price constraints. If the investment that is required to increase non-liquified natural gas production and energy generation and transportation capacity fails to materialize on a timely basis, economic activity in Argentina could be curtailed.

The Argentine economy may experience significant inflation and none of our Peso revenues are subject to indexing.

In recent years, Argentina has confronted inflationary pressure, driven by significantly higher fuel and food prices, among other factors. According to INDEC, the Argentine consumer price index ("CPI") increased 9.8%, 8.5%, 7.2%, 7.7%, and 10.5% in the years ended December 31, 2006, 2007, 2008, 2009 and 2010, respectively. From January 1, 2011 through February 28, 2011, CPI rose by 1.5%.

In the past, inflation has materially undermined the Argentine economy and the Argentine Government's ability to create conditions conducive to growth. A return to a high inflation environment could undermine Argentina's foreign competitiveness by diluting the effects of the Peso devaluation and negatively impacting the level of economic activity and employment.

Prior to the enactment of the Public Emergency Law, the tariffs that we charged were linked to a rate per unit of usage calculated in U.S. Dollars and we also had the right to adjust that rate semiannually in accordance with variations in the U.S. producer price index. Pursuant to the Public Emergency Law, provisions requiring adjustments in agreements for the provision of public utility services between the Argentine Government and the providers of those services (including ourselves) based on foreign inflation indexes and all other indexation mechanisms have been revoked, and the tariffs for the provision of such services were converted from their original U.S. Dollar values to Pesos at a rate of Ps. 1.00 per US$ 1.00. Unless our tariffs increase at a rate at least equal to the rate of inflation, any further increase in the rate of inflation will result in decreases in our revenues in real terms and will adversely affect our results of operations.

See "Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an argentine court. As a result our auditors continue to express substantial doubt as to our ability to continue as a going concern" in "Risk Factors Relating to Us."

In addition, at the end of January 2007, the INDEC, the Federal Government's statistical agency and the only organization with operative ability to cover large territories and broad volumes of data in Argentina, experienced a process of institutional reform. Private analysts have since cast doubt over the accuracy of the inflation figures (and to other economic data affected by inflation data, such as poverty and GDP estimates) published by INDEC. If the CPI and national GDP figures are subsequently found to be incorrect or are restated, the GDP figures presented in this annual form could be incorrect as is. Argentina's inflation may be significantly higher than the rates indicated by recent official reports. In addition, findings that the methodology used to calculate the consumer price index was manipulated by the Federal Government, or that it is necessary to correct the CPI and the other INDEC indexes derived from the CPI, could result in a further decrease in confidence in Argentina's economy, which could, in turn, have adverse consequences for our business and our financial condition.

The measures designed by the Argentine Government to control the flow of funds into Argentina may affect our capacity to access the international capital markets.

Starting in February 2002, any dividend payment outside Argentina, irrespective of the amount, needed prior authorization from the Central Bank. In December 2002 the rule was amended through Communication "A" 3,845 which required Argentine companies to obtain prior authorization from the Central Bank to purchase currency in excess of US$ 150,000 (in the aggregate) per month. This amendment applied to the payment of dividends.

On January 7, 2003, the Central Bank issued Communication "A" 3,859 which is still in force. Pursuant to this Communication, Argentine companies have no limitation on their ability to purchase foreign currency and transfer it outside Argentina to pay dividends as long as such dividend payments result from approved audited financial statements. In the future, similar restrictions may be enacted by the Argentine Government or the Central Bank and, if this were to occur, it could limit our ability to transfer funds abroad, which could have an adverse effect on the value of our common shares and the ADSs.

In addition, by means of Decree No. 616/05, the Argentine Government established that, except in limited circumstances, the transfer of foreign currency into the local exchange market from foreign loans granted to private sector companies and certain foreign investments must be formalized and must remain in Argentina for at least 365 calendar days from the date the funds enter Argentina. In this respect, pursuant to Central Bank regulations, principal under foreign financial loans may not be repaid before the expiration of a 365-day term counted as from the day of the conversion to Pesos of the loan proceeds in the local foreign exchange market, irrespective of the form of repayment and of whether access to the exchange market is required or not for such purpose.

Decree No. 616/05 also established the obligation to constitute a deposit over 30% of the funds transferred to Argentina for foreign financial financings and certain foreign investment. This deposit is nominative, nontransferable, does not accrue interest, must be formalized in U.S. Dollars and has a term of 365 calendar days. The deposit may not be granted as security in relation to other credit operations. The financing of exports and imports and all primary public offerings of securities in regulated markets are excluded from the restrictions imposed by Decree No. 616/05. Additionally, specific financings are exempted from the mandatory 30% deposit.

Although the Argentine Government has exempted certain corporations from compliance with Decree No. 616/05 in particular cases, this Decree can severely limit our capacity to access international capital markets or to obtain financings subject to these provisions, and thus may adversely affect our financial situation and our operational results. Therefore, investors are advised to undertake a thorough reading of Executive Decree No. 616/05, Argentine Ministry of Economy and Production Resolution No. 365/05 and the Argentine Foreign Exchange Criminal Law No. 19,359 on foreign exchange matters as well as all regulations issued thereunder, any supplementary rules related thereto and all other relevant regulations.

Changes in the interpretation by the courts of labor laws that tend to favor employees could adversely affect our results of operations.

In addition to our 1,039 employees, we rely on a number of third party services providers to outsource certain services. We follow very strict policies to control the compliance by such third party services providers with their labor and social security obligations. However, due to changes in the interpretation by the courts of labor laws that tend to favor employees in Argentina, companies' labor and social security obligations towards their own employees and employees of third party services providers have significantly increased. As a result of the foregoing, potential severance payment liabilities have significantly increased and, in the event any third party provider fails to duly comply with its labor and social security obligations towards its employees, we may be faced with litigation by employees of such third party provider to hold us liable for the payment of any labor and social security obligations defaulted by any such third party services provider. Therefore, our labor costs may increase as our indemnification responsibilities and costs expand, adversely affecting the result of our operations.

Measures taken by the Argentine Government to address social unrest may adversely affect the Argentine economy and our results of operations.

Argentina faces social and political tensions and high levels of poverty and unemployment continue. These conditions could adversely affect our relations with our employees, which could affect our operations. The principal challenge of President Fernandez de Kirchner's administration is to generate confidence and create the necessary conditions to allow long-term and sustainable growth. President Fernandez de Kirchner's efforts at generating confidence received a setback when her political party lost the mid-term elections on June 28, 2009. Thus, there is no assurance that President Fernandez de Kirchner's administration will be able to implement the required reforms to engender economic growth and reestablish political confidence. If the Argentine Government is unable to foster economic growth, civil unrest and unemployment could return, which could have an adverse effect on the economy and financial system.

In the past, the Argentine Government has enacted laws, decrees and rules that compelled private companies to maintain certain wage levels and provide their employees with certain benefits. Also, both private and public sector employers were affected by the pressure of certain employees or unions to raise salaries and benefits. It is likely that the National Government will adopt new measures that will compel companies to raise salaries and increase benefits in favor of their employees and in favor of unions related to the companies' activities, and that such employees and unions will actively demand such increases. Therefore, our labor costs may increase, adversely affecting the results of our operations.

In March 2008, the Federal Government introduced a system of sliding scale tax rates applicable to certain Argentine exports. This system, which established a maximum price for their products, caused general strikes and demonstrations within the agricultural sector, whose exports had driven the country's recovery to a large degree. These protests interrupted economic activity in the country for several months in the year ended December 31, 2008. Although the Federal Government subsequently terminated this new tax system, the adoption of new tax rates, or the failure of the Federal Government to implement measures favorable to the agricultural sector, could lead to new social unrest.

Future government policies aimed at addressing social unrest may include expropriation, nationalization, forced renegotiation or modification of existing contracts (including our concession), suspension of the enforcement of creditors' rights and shareholders' rights, new taxation policies, including royalty and tax increases and retroactive tax claims, and changes in laws, regulations and policies affecting foreign trade and investment. If any of these policies are adopted, they could adversely and materially affect the economy and our business.

The Argentine economy is vulnerable to economic developments in other markets and any consequential external "contagion" effects, which could have a material adverse effect on Argentina's economic growth and negatively impact the business of the Company.

Financial and securities markets in Argentina are influenced, to varying degrees, by economic and market conditions in other global markets. Although economic conditions vary from country to country, investors' perceptions of the events occurring in one country may substantially affect capital flows into and securities from issuers in other countries, including Argentina.

For example, as a result of the subprime crisis that began in 2007, many financial entities suffered vast losses and certain among them were shut down or were subject to national bailout plans. Notwithstanding past and future government measures implemented to curtail these events, the long-term effects of the subprime crisis on the international financial system remain uncertain and may have an adverse impact in Latin America and the Argentine economy, as well as a negative impact on our business and operations.

Furthermore, international investors' reactions to the events occurring in one market sometimes demonstrate a "contagion" effect in which an entire region or class of investment is disfavored by international investors. The Argentine economy was adversely impacted by the political and economic events that occurred in several emerging economies and continues to be affected by events in the economies of its major regional partners. In particular, the Argentine economy was negatively impacted by the political and economic events that took place in developing economies during the 1990s, including those in Mexico in 1994, the collapse of various Asian economies from 1997 to 1998, the Russian economic crisis of 1998, and the Brazilian devaluation in January 1999.

Consequently, any such future events in the economies of both developed countries or emerging markets and consequential "contagion" effect may materially affect the Argentine economy or securities markets and, in turn, our business and our financial condition.

The nationalization of Argentina's pension funds has dramatically changed the dynamics of the local capital markets.

In October 2008, the Government proposed to the Argentine Congress the elimination of the private retirement pension system. This was enacted as law in November 2008 and promulgated as Law No. 26,425, prescribing, among other rules, (i) that the funds accumulated under the private retirement pension system in the previous 14 years will be administered by the Argentine government, (ii) a creation of a public retirement pension system and mandatory citizens' contributions to this new system, and (iii) the elimination of the fund capitalization system. Law No. 26,425 has been supplemented, among other regulations, by Executive Decree No. 2,103/08, which describes the composition of the funds to be managed by the Argentine government and instructions for the administration thereof, and by Executive Decree No. 2,104/08, which regulates the transfer to the Argentine government of all the contributions and documentation of the affiliate members of the fund capitalization system, retroactive to December 1, 2008.

The end to the private retirement pension system has involved a significant loss for the Argentine capital markets, as theAdministradora de Fondos de Jubilaciones y Pensiones(Retirement and Pension Fund Administrators) led the group of institutional investors. With the nationalization of their assets, the dynamics of the local capital markets changed due to the decrease in size, becoming substantially concentrated. In addition, the government became a significant shareholder in many of the country's publicly-held companies and on April 13, 2011, the Argentine Executive Branch issued Decree No. 441/11, which purports to abrogate the 5% cap on the Argentine government's voting rights in publicly held companies. These circumstances may bring about consequences to Argentina's capital markets and companies that are difficult to measure as of the date hereof. In addition to other prospective contingencies, which are difficult to measure at present, these difficulties, the solutions thereto and potential and similar measures in the future have affected and may affect liquidity and investor confidence in Argentina and, in turn, the possibility of funding being obtained in the capital markets by domestic companies like ours.

Risk Factors Relating to Us

Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors continue to express substantial doubt as to our ability to continue as a going concern.

In January 2002, the Executive Power issued Law No. 25,561 (the "Public Emergency Law") by which it was able to convert the public service companies' tariffs from their original U.S. Dollar values to Pesos at a rate of Ps. 1.00 per US$ 1.00 and freeze them at that rate. See Item 3: "Risk Factors Relating to Argentina-Restrictions on the Argentina's energy supplies could negatively affect Argentina's economic activity. The Public Emergency Law also authorized the Argentine Government to renegotiate public service companies' licenses (including our license). We are currently negotiating with theUnidad de Renegociación y Análisis de Contratos de Servicios Públicos ("UNIREN"), an organization established by the Argentine Government, to renegotiate the license contracts and the tariffs that we may be able to charge in the future.

According to the Public Emergency Law, the government must consider the following factors when negotiating the new tariff regime: the effect that new tariffs may have on the economy, especially with respect to competitiveness and income distribution, the service standards, the investments which licensed companies have been authorized to make and have made, consumer protection and accessibility of the services, the security of the systems, and the profitability of the public service companies.

On January 24, 2003, the Argentine Government issued Emergency Decree No. 120/03, which established that the Argentine Government may provide an interim tariff increase or adjustment that will be in force until the renegotiation process of public service contracts and licenses established by the Public Emergency Law is completed. On January 30, 2003, Decree No. 146/03 and Resolution No. 2,787/03 issued by ENARGAS provided an interim tariff increase of approximately 10% for the electricity and gas sectors. On January 30, 2003 we started invoicing our customers for the increased tariffs. However, the National Ombudsman, the Ombudsman of the Autonomous City of Buenos Aires and a number of advocacy consumer organizations filed their objections to both decrees in numerous courts and, pursuant to these objections, a court issued a preliminary injunction prohibiting the tariff increase. As a result of the injunction, on February 27, 2003, we suspended the invoicing of our customers at the increased tariff level and resumed invoicing at the former, lower tariff levels.

During 2007, the number of companies having an agreement with the Argentine Government increased. The first gas distribution company to sign an agreement with the Argentine Government related to the renegotiation of the license and tariffs already received the Executive Power's ratification of the agreement and their stipulated tariff increase became effective on April 1, 2007. On April 26, 2007, two other companies (members of the same economic group) also reached preliminary agreements to renegotiate their gas distribution licenses with the Argentine Government. These companies obtained a 27% increase in their distribution gross margin for all tariff categories except residential customers, starting July 2007 for one of the companies and August 2007 for the second one. During the second quarter of 2007, two other gas distribution companies reached agreements with the Argentine Government on similar terms. During 2008, two additional gas companies reached agreements with the National Government under similar conditions to those mentioned above.

From 2009 to the present, all transition agreements entered into by distribution and transportation companies have been ratified by Executive decree. We, along with another distribution company and two transportation companies, are the only ones that have not signed renegotiation agreements, which permit signators to begin the full rate tariff review. While several companies have ratified renegotiation agreements, only one company (Gas Natural Ban) has had its new tariff schedules approved by ENARGAS, which enables it to invoice its distribution services under the new tariffs.

To date, we have not agreed to the application of the same terms contained in the agreements of the other gas companies in our negotiations with UNIREN due to existing differences between our situation and those of the other gas distribution companies. As a condition precedent to the Argentine Executive Power's approval of the Agreement between us and UNIREN, UNIREN requires that our majority shareholder suspend any and all claims or actions brought against the Argentine Government in response to measures adopted by the Argentine Government as a result of the state of emergency established by the Public Emergency Law. Furthermore, the Agreement states that after the publication in the Official Gazette of ENARGAS resolution that approves the new tariffs, our majority shareholder should withdraw all such claims and actions brought against the Argentine Government. The Agreement provides that we should grant the Argentine Government an indemnity under which we would be responsible for the full cost of any amounts that the Argentine Government is obligated to pay in connection with any claims brought by any of our shareholders. On December 24, 2007, BG, our majority shareholder, obtained a favorable award from the UNCITRAL in a claim brought against the Argentine Government for breach of the Bilateral Investment treaty for the Promotion of Investments executed in 1990 between Argentina and the United Kingdom. The Argentine Government challenged this award in U.S. Federal Court. The U.S. Federal Court upheld such award. We cannot assure you if and when the renegotiation process will conclude, nor can we assure you whether the renegotiation process will result in additional restrictions (for example, required capital expenditures which prove to be unprofitable or a requirement that we agree to indemnify the government in case compensation is obtained by a shareholder as a consequence of a legal action against the government) or if the new tariffs will be sufficient to allow us to cover our costs and service our existing indebtedness after the restructuring or maintain their value in U.S. Dollars or Pesos over time to compensate for any past and future increases in inflation or the devaluation of the Peso. After various rounds of negotiation, we signed a transition agreement with UNIREN (the "Transition Agreement"), which was approved by our Shareholders on October 14, 2008. The Transition Agreement was then sent to UNIREN in order to obtain Executive Power approval. On April 14, 2009, the Executive Power issued Decree No. 234/09 approving the Transition Agreement (which includes the increases in the distribution and transportation tariffs as from September 2008). See Item 4: "Information on the Company-Regulatory Framework-ENARGAS-Current Tariffs" for further details on the Transition Agreement.

In September 2009, ENARGAS submitted to the Ministry of Federal Planning, Public Investment and Services ("MPFIPS") Sub-secretary of Coordination and Management Control MetroGAS' background and the tariff schedules which would result from the executed Transition Agreement. On February 17, 2010, MetroGAS commenced a legal proceeding in the Federal Administrative Court of Appeals requiring the issuance of an order of action against the Sub-secretary of Coordination and Management Control for its delay in reviewing the proposed MetroGAS tariff schedules. However, on June 8, 2010, MetroGAS terminated this legal claim and commenced a new action before the Federal Administrative Court to require the issuance of an order of action against ENARGAS and the Sub-secretary of Coordination and Management Control, by which they would be obliged to publish the new tariff schedules. On November 30, 2010, MetroGAS' claim was denied because, among other reasons, the court ruled that it is not allowed to interfere with ordinary duties falling under the responsibility of ENARGAS. As of the date of this annual report, there has been no further action on the part of the Sub-secretary of Coordination and Management Control and ENARGAS has not yet issued the proposed MetroGAS tariff schedules, even though during June 2010 MetroGAS sent investment records from September 2008 to December 2009 to ENARGAS and UNIREN in accordance with the Transition Agreement. In addition, during 2010, several notices were sent to ENARGAS, UNIREN and MPFIPS highlighting the difficulties MetroGAS has experienced in maintaining its solvency and the urgent necessity of signing the Renegotiation Agreement.

Based on these delays, we cannot offer any assurance as to when our tariff renegotiations will officially conclude or whether they will have a positive or adverse effect on us. Even if our revised tariff schedules are published, it is possible that such settlement will lead to social unrest, protests by our customers or objections from consumer advocacy organizations or the National Ombudsman, thereby hindering the implementation of any future agreement or the application of new tariffs. Moreover, we can offer you no assurance that tariff increases would not result in an increase in our overdue receivables, and consequently, our result of operations.

Furthermore, the continued delays in the tariff adjustments detailed above have caused our financial condition to deteriorate and have affected our capacity to generate the cash flow necessary to maintain normal activities and comply with our indebtedness due in 2010. On January 5, 2010, our Board of Directors approved the hiring of Barclays Plc. to act as financial advisors in connection with a refinancing of our outstanding debt. Various courses of action were discussed with the creditors and the financial advisors but none of the suggested alternatives was a viable option for the Company.

In turn, the adverse financial conditions we face as a result of this continued delay in our tariff and license negotiation led our Board of Directors to approve our filing of a petition for voluntary reorganization (concurso preventivo) in an Argentine court on June 17, 2010. This reorganization filing generated an event of default under our outstanding debt obligations. Pursuant to the terms of our outstanding debt obligations, this default resulted in the automatic acceleration of our outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on our outstanding debt obligations.

We have thus prepared our annual financial statements for the fiscal year ended December 31, 2010 included herein, assuming that we will continue as a going concern. Consequently, our independent auditors, pwc, issued a report dated April 28, 2011 on our financial statements as of and for the years ended December 31, 2010 and 2009, which contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern. Note 2 of the financial statements included herein discloses that the suspension of the original regime for tariff adjustments and the inability to generate sufficient cash flows to pay our financial debt obligations led us to file a petition for a voluntary reorganization proceeding (concurso preventivo) in an Argentine court on June 17, 2010. As of the date of this annual report, it is not possible to predict the outcome of this reorganization proceeding. These circumstances raise substantial doubt about our ability to continue as a going concern. However, our financial statements as of and for the year ended December 31, 2010 do not include any adjustments or reclassifications that might result from the outcome of this uncertainty. See Item 18: "Financial Statements." We can offer no assurance that we will be able to overcome these financial difficulties.

Our filing for voluntary reorganization (concurso preventivo) under Argentine Law on June 17, 2010 makes us subject to the risks and uncertainties associated with such reorganization proceedings.

Upon filing for reorganization, we are continuing to operate our business as a debtor-in-possession under a court-appointed supervisor (the síndico concursal). We plan to submit a plan for reorganization to the bankruptcy court. However, we can offer no assurance that all conditions precedent to implementation of the plan will be satisfied or when, if ever, such satisfaction will occur. Failure to satisfy such conditions to implementation may result in lengthier reorganization proceedings and may eventually lead to our liquidation.

Additionally, for the remainder of reorganization proceeding, our operations will continue to be subject to the risks and uncertainties generally associated with such reorganization proceedings, such as:

the relationships between us and our customers, employees, vendors, strategic partners and others may be negatively affected by our filing for reorganization, including risks that our customers will be less likely to purchase our services, that our employees will seek out other opportunities or lack proper motivation to fulfill their commitments and that vendors and strategic partners could terminate their relationships with us or require financial assurances or enhanced performance to continue their business relationships with us, which may be unduly burdensome on our business and operations;

the actions and decisions of our creditors and other third parties with interests in our reorganization may be inconsistent with our plans;

our ability to obtain and maintain commercially reasonable terms with vendors, strategic partners and service providers;

our ability to obtain and maintain contracts that are critical to our operations; or

our ability to retain customers; and our ability to retain and motivate our management team and other key employees.

Upon our filing for voluntary reorganization, ENARGAS effected an intervention over our business. We are unsure what effect, if any, such intervention will have over our results of operations and financial condition.

Following our filing for voluntary reorganization on June 17, 2010 ENARGAS issued Resolution No. I-1,260 and appointed Antonio Gómez as MetroGAS' intervenor for the next 120 days. The resolution states that the intervenor will (a) supervise and control all of our activities that could have an impact in the public service gas supply rendered by us, which supply is the core of the license agreement; (b) initiate a corporate audit of us; and (c) itemize and appraise all our assets. This intervention has been extended twice, on October 22, 2010 and on February 22, 2011, by means of Resolutions No. I/1,431 and Resolutions No. I/1,612, respectively. We are uncertain as to the effect such intervention will have over our results of operation and financial condition.

Our ADSs have been suspended from trading on and were delisted from the New York Stock Exchange.

As a result of our filing for voluntary reorganization, our ADSs were (i) suspended from trading on the NYSE beginning on June 18, 2010 and (ii) delisted from the NYSE following the NYSE's application on Form 25 with the SEC on July 15, 2010. The suspension of trading of our ADSs on the NYSE and their subsequent delisting have negatively impacted the levels of liquidity available to our ADS holders as they can only trade their securities (i) on the over-the-counter market in the United States or (ii) after converting them into common shares on the Buenos Aires Stock Exchange. Additionally, we can provide no assurance that we will be able to re-list our ADSs on the NYSE should we successfully reorganize our Company.

The energy industry in Argentina has experienced an (i) increase in the demand for natural gas, which may not be met by current gas and transportation supply, and (ii) an increase in government interventions, both of which could lead to our inability to meet our customers' needs.

As stated above, the Public Emergency Law of 2002 converted the public service companies' tariffs from their original U.S. Dollar values to Pesos at a rate of Ps. 1.00 per US$ 1.00 and froze them at that rate. This resulted in the price of natural gas being substantially lower on an energy-equivalent basis than the prices of competing fuels. These factors led to a substantial increase in the demand for natural gas and, which, combined with low investments in facilities for the production, transportation and distribution of natural gas as a result of an unfavorable economic environment at the beginning of the decade, produced a large disparity between the demand and supply of natural gas and gas transportation capacity. This situation may eventually lead to a gas and electricity supply bottleneck, primarily due to the high risk of failures of the Argentine energy supply system.

In order to prevent natural gas shortages in the domestic market and to guarantee the natural gas supply to non-interruptible consumers, pursuant to Resolutions No. 659/04, 503/04, 752/05, 882/05, 939/05, 1,329/06, 1,886/06 and 599/07 (all enacted by the Energy Secretariat) and their regulatory rules, ENARGAS and/or other competent authorities are allowed to redistribute gas volumes and/or reallocate transportation capacities, thereby modifying existing contractual rights and obligations set forth under agreements entered into by and between private parties. In our experience, even after these resolutions, we did not experience any significant difficulties regarding deliveries of gas from our suppliers until the winter of 2006.

At the end of May 2007, the Argentine energy system entered into a state of emergency as a result of low temperatures throughout Argentina, the decline in hydroelectric power, a reduced availability of fuel oil for combined cycle power plants and insufficient injection of gas at wellheads. In order to prevent shortages resulting from this state of emergency, the Energy Secretariat and ENARGAS issued resolutions that allowed distributors to use gas originally destined for exports and electric generation to meet domestic demand. While this did not affect us because we did not utilize these resources, the Secretariat of Interior Commerce and the Energy Secretariat took further steps in governmental oversight in 2007 by increasing its intervention over our business operations; in particular, they restricted our distribution of natural gas to certain industrial customers and power plant customers, with the goal of guaranteeing the supply of natural gas to non-interruptible customers. The state of emergency continued during 2008, 2009, and 2010. Due in large part to this heightened government intervention in our business, as well as (i) significant increases in demand for natural gas, (ii) shortages in both our supply and transportation capacities, and (iii) the expiration of our long-term natural gas purchasing contracts, we have faced difficulties in meeting the natural gas demand of our firm customers, especially during the winter months. We expect a similar trend to continue in 2011.

Thus, in cases where demand for our services exceeds supply, our license requires us to interrupt deliveries to our industrial and compressed natural gas ("CNG") customers before interrupting the supply to our residential customers. If, after taking such actions we are still unable to supply our residential customers, our license requires that we either (i) declare a state of emergency and follow the instructions of ENARGAS or (ii) adopt the decisions made by an Emergency Committee, comprised of competent authorities and the implicated gas transportation and distribution companies. Furthermore, if such energy interruptions occur as a result of our actions, we may be fined up to US$ 500,000 and become vulnerable to the termination of our license. We may also be exposed to liability for damages caused to our customers by such interruptions.

These continued government interventions, combined with unmet demand, may have an adverse effect on the normal supply of our services to our residential, industrial and power plant customers, affecting the reliability of the distribution system and resulting in a decrease in our sales, which could result in a material adverse effect on our cash flow and results of operations

Demand for our services is highly sensitive to weather conditions in Argentina

Our sales are highly sensitive to weather conditions in Argentina. Demand for natural gas is, and, accordingly our revenues are, significantly higher during the winter months than during the rest of the year, especially in years with colder winters. Also, in the absence of unusual circumstances, our expenses in years with colder winters do not increase in proportion to our revenues, thus making those years relatively more profitable than years with warmer winters. In 2011, if the current government intervention ceases and even if the winter months prove to be unusually cold, we may not be able to record any positive revenue effects because we may (i) have more demand than our current contracted transportation capacity and (ii) experience an increase in fines from our power plant customers if we interrupt the delivery of gas to them beyond a certain limit.

On the other hand, unseasonably warm weather in our service area during the winter months can cause a significant reduction in gas demand and higher levels of hydroelectric generation, especially among residential customers (our largest single source of revenues) and upon which we charge the highest margins. Since the current regulatory scheme does not allow us to recover the cost of any unused firm transportation capacity through our tariffs, the adverse effect of a weather-related reduction in demand from our residential customers may be worsened if we are unable to transfer their excess transportation capacity to other classes of customers or to dispose of our surplus capacity.

Our revenues may be adversely affected by increases in the supply of hydroelectric power.

Under the Argentine electrical regulatory system, electricity generators are dispatched in ascending order of marginal generation cost. Since hydroelectric generation plants generate power at a lower marginal cost than the generation marginal cost of other power plants (including our power plant customers), a material increase in power generated by hydroelectric generating stations may displace a material amount of power generated by other types of power plants (including our power plant customers) and cause a corresponding decrease in sales to our power plant customers. Both heavy precipitation and a material increase in installed hydroelectric generation capacity will, unless the related power is exported or unless transmission facilities are insufficient to transmit such power, most likely increase the supply of hydroelectric power, thereby reducing demand for thermal generation and, as a result, our sales to power plants. The effect of this displacement is particularly adverse to us if it occurs during the warmer months of the year, the period during which our sales to power plants typically represent a significant portion of our revenues and permit us to use our excess firm transportation capacity.

We have been, and continue to be, dependent on the regulatory authority of ENARGAS, which may have an adverse effect on our financial condition and results of operations.

Our results of operations depend on applicable regulations and the interpretation and application of such regulations by ENARGAS. ENARGAS' interpretation and application of such regulations has been adverse to our business on a number of occasions. For example, under the regulations, our tariffs are required to be adjusted periodically to reflect changes in the cost of purchased gas as well as other taxes and charges we incur in distributing gas to our customers. Notwithstanding the foregoing, on several occasions ENARGAS has limited the pass-through of the cost, taxes and other charges of gas we purchased.

We have filed appropriate appeals with respect to ENARGAS' actions, some of which have been rejected. Future regulatory actions and interpretations by ENARGAS, including future limitations on the pass-through of material gas purchase costs, taxes and charges, could have a material adverse effect on our financial condition and results of operation.

There have been two incidents involving a 24" steel main operating at 22 bar. Consequently, pipeline integrity is being assessed. The outcome of this assessment could result in increased investment requirements in order to reduce the risk of similar incidents taking place.

In August 2007, there was an incident (related to a manufacturing defect) to a 24" steel main operating at 22 bar. This situation has modified the risk assessment of this main, which takes into account the likelihood of failure and the consequences of such failure. To reduce the risk of similar incidents occurring, evaluation tests were performed during 2008 that led to a reduction in the pressure of the steel main to 12 bar. Additionally, a structural reliability analysis ("SRA") was performed during 2009 that recommended a further reduction to a pressure below 6 bar. The steel main is now operating at 4 bar. As a result of the quantified risk assessment ("QRA") we performed in 2010, we concluded that the new pressure of the pipe is tolerable in the ALARP zone. Despite the QRA results, however, the replacement of this pipeline is still necessary to restore the reliability of the 22 bar system. In 2010, taking into consideration the importance of this pipe as it connects MetroGAS' network with the distribution company next to MetroGAS' area, and in order to keep the pressure at 22 bar, we replaced a 2km long part of this pipe; however, due to lack of available resources, its complete replacement is not within our maintenance plan for 2011.

In August 2009, there was another incident (related to a failure in the circumferential weld of the pipe) on a 24" steel main operating at 22 bar. Although we are currently performing an evaluation of this pipe , both incidents have increased the operation risk in the 22 bar system. Consequently, we have decided to reduce the pressure in this system until we have completed the assessment of the sections of the pipelines more likely to fail.

We cannot give any assurances as to whether the outcome of these assessments could result in increased investment requirements or whether, if investment requirement were increased, our financial situation would allow us to meet these additional investment requirements. Additionally, the occurrence of similar incidents could adversely affect our results of operations.

We may be required by law to undertake a mandatory capital stock reduction and to be dissolved and liquidated.

If our losses for any year exceed our reserves plus 50% of our capital stock at the end of that year, we would be required to reduce our capital stock pursuant to Article 206 of the Argentine Corporations Law unless we receive a capital contribution sufficient to restore our financial condition. In addition, if our shareholders' equity becomes negative (that is, if our liabilities exceed our assets) at any year-end, we will be required to dissolve and liquidate pursuant to Article 94 of the Argentine Corporations Law unless we receive a capital contribution which would result in our assets exceeding our liabilities.

Our revenues may be adversely affected by the right of our clients to bypass our services.

Although our license grants us the exclusive right to distribute natural gas within our service area, Argentina's gas delivery system is an open-access system. A primary feature of an open-access system is that large users within our service area are permitted to contract for the purchase of natural gas from marketers or producers and enter into contracts with transportation and distribution companies to deliver the purchased gas to these users. Such users arrange their own gas supply while they continue to use our distribution system and our transportation capacity for delivery of gas. In such cases, the users pay us a tariff for the use of our distribution system and transportation capacity. Alternatively, users may build a direct connection to a transmission. Customers within our service area who contract for both direct purchase and transportation of gas without use of our distribution system would not pay us a tariff.

If any consumer tries to bypass our system completely in order to avoid paying us tariffs will incur various costs and face certain practical limitations that, in some cases, make bypassing our system economically disadvantageous or impractical. For example, users not using our distribution system must incur the expense of building and maintaining connection lines (an expense that increases with distance from the transmission line and population density of the proposed pipeline area) as well as the expense of associated metering and other items. Limited access to firm transportation capacity will also be a problem for users who require an uninterrupted gas supply. In addition, a customer desiring to purchase gas from a third party must give ENARGAS and us three months' notice of such fact.

We have built strong working relationships with many of our major customers and we are implementing appropriate contracting and pricing policies that discourage the construction of direct connecting pipelines between our major users and the transportation systems that would completely bypass our system and avoid the use of our firm transportation capacity. However, some of our users may still completely bypass our services or require us to further unbundle our services in a manner that could adversely affect our margins. See Item 4: "Information of the Company-Business Overview-Regulatory Framework." Our management believes that the effect of any such situations could, however, be partially mitigated by provisions in certain of our firm transportation contracts with Transportadora de Gas del Sur S.A. ("TGS") which provide that, if any of our users enters into a firm transportation agreement with TGS (either directly with TGS or with a third party such as a producer or gas broker), we would have the right to reduce our firm transportation commitment with TGS by up to the amount of the lost service between us and such customer. Our firm transportation contracts with TGN contain similar provisions.

Alternative energy sources, primarily fuel oil for power plants and liquid processed gas ("LPG") for residential users and smaller commercial users, are currently substitutes for natural gas. For many years now, the abundance of natural gas in Argentina has historically provided natural gas with a large cost advantage over fuel oil. In order to enable us to achieve a higher load factor during the warmer months when residential demand is weaker, certain power plant users have agreed to take a minimum amount of gas transportation at discounts from maximum tariffs. Conversely, during the colder months, we and certain dual-fuel power plants in our service area agreed that we would deliver to such power plants a minimum volume of gas transportation on an interruptiblebasis. If we fail to meet our commitments, we will be required to refund a portion of the excess cost of fuel oil over the price of undelivered gas on an energy-equivalent basis.

After a number of extensions, all of our natural gas purchasing contracts expired on July 31, 2007 and January 1, 2011 and we have not entered into any new contracts. The delay in entering into new contracts, as well as the execution of a new contract between the National Government and the gas producers pursuant to Resolution No. 599/2007 of the Energy Secretariat, could adversely affect our operations.

The agreements between the natural gas suppliers and us, provided for in Resolution No. 208/04, expired on December 31, 2006, except for our Wintershall Energia S.A. contract which expired on January 1, 2011. However, these agreements were extended until April 30, 2007 and subsequently until July 2007 as the natural gas suppliers were allotted more time to reply to the National Government's proposed agreement with them.

On June 14, 2007, Resolution No. 599/07 of the Energy Secretariat was published in the Official Gazette, approving the draft Agreement with Gas Producers 2007-2011 (the "Agreement 2007-2011"). It was subsequently ratified by the gas producers and came into effect on August 1, 2007. The Agreement 2007-2011 governs and regulates the supply of natural gas by gas producers to gas distribution companies (who in turn distribute gas to residential users, small businesses, industries, CNG refueling stations and power plants) for the period between August 1, 2007 and December 31, 2011. The Agreement 2007-2011 sets forth regulations depending on the type of consumer and indicates the volumes, basins and point of entry to the transportation system to be observed by each gas producer. As a result of factors not attributable to us (e.g., lack of compliance of certain producers, lack of transportation capacity, increased demand for natural gas, etc.), the volumes made available to us under the Agreement 2007-2011 do not cover the demand for natural gas from our non-interruptible customers.

Although the Agreement 2007-2011 foresees the execution of ancillary gas supply agreements ("GSAs") between gas distribution companies and natural gas suppliers, we have not yet entered into any GSAs because the terms and conditions offered by the natural gas suppliers have not been acceptable to us. In fact, we believe their offers are in breach of their obligations under the Agreement 2007-2011. Additionally, none of the other eight gas distributors has entered into any GSAs. Consequently, as of the date of this annual report our supply of natural gas is coming almost exclusively from (i) natural gas suppliers under the terms and conditions of the Agreement 2007-2011 and (ii) ancillary supply orders issued by the competent authorities, as a result of their intervention in order to supply the non-interruptible demand. For example, on October 4, 2010, ENARGAS issued new dispatch rules named "Procedure for Gas Applications, Confirmations and Control" governinginter alianatural gas injection by producers and natural gas nominations by distributors. Among its rules, the Procedure establishes that natural gas distributors are free to determine the volumes of gas they require for their non-interruptible demand (comprising basically of residential and small commercial users) to be supplied by the producers, regardless of the estimated volumes committed by producers under the Agreement 2007-2011. Since October 1, 2010, when such Procedure entered into force, MetroGAS has nominated daily the total volume of natural gas needed in accordance with the Procedure to supply its non-interruptible demand.

If new agreements between the National Government and natural gas suppliers are reached, we will have to continue to abide by the terms of such agreements. Additionally, we can offer no assurance that we will be able to enter into ancillary GSAs in a timely manner or that the natural gas producers will confirm and inject all the natural gas volumes we nominate in accordance with the Procedure for Gas Applications, Confirmations, and Control to satisfy our non-interruptible demand. Our continued dependence on agreements between the National Government and the gas suppliers may have an adverse impact on our ability to meet our contracted volumes of natural gas as well as our operating costs and results of operations.

Our license is revocable under certain circumstances, and revocation of our license would have a material and adverse effect on us.

Our license, the specific bidding rules, or the "Pliego," governing the privatization of Gas del Estado S.E., or "Gas del Estado," and the regulations issued pursuant to the law under which we were privatized, Law No. 24,076, or the "Gas Act," contain requirements regarding quality of service, capital expenditures, restrictions on transfer and encumbrance of assets, restrictions on cross-ownership between producers, transporters and distributors of gas and restrictions on the transfer by Gas Argentino S.A., or "Gas Argentino," of our Class A Shares and the transfer by Gas Argentino's shareholders of their shares of Gas Argentino. Failure to comply with these requirements or restrictions may result in a revocation of our license by the Argentine Government upon the recommendation of ENARGAS. The purchase by us of more than 20% of our gas in any month from any person that controls Gas Argentino or from any affiliate of the controlling person could result, under certain circumstances, in the revocation of our license.

As an example, under our license, we are required to make all improvement to our Essential Assets in a reasonable period as well as repair and maintain those Essential Assets which have completed their useful life. In connection with such requirement, we implemented a major capital expenditure program beginning in 1993 designed to extend and renovate mains, regulators, valves, and meters in order to ensure the safety and reliability of our distribution system, to modernize and centralize our information systems, and to upgrade our customer service branch network. We made capital expenditures of approximately Ps. 524.9 million between 1993 and 2001. However, in response to the Argentine economic crisis and the pesification and freezing of our tariffs, at the beginning of 2002 we had to re-focus our strategy on short-term challenges. Since then, our short-term strategy has aimed at working on our tariff negotiations in order to ensure the continuity of our operations, maintenance of safety and quality standards, and coverage for our debt service payments. Thus, we reduced our capital expenditures and preventive maintenance programs without affecting our ability in the near-term to serve our customers safely or operate our network in accordance with quality and environmental standards. We made capital expenditures of approximately Ps. 158.8 million between 2002 and 2006. Our capital expenditures during 2007, 2008, 2009, and 2010 amounted to approximately Ps. 62.9 million, Ps. 84.2 million, Ps. 105.8 million, and Ps. 119.1 million, respectively. Since our tariff renegotiations continued to be delayed, our ability to devote resources to capital expenditures has been significantly hindered and we may not be able to make the required improvements to our Essential Assets. A failure to do so may result in a breach of the Distribution License Basic Rules and ultimately in a revocation of our license.

Furthermore, our bankruptcy would result in the revocation of our license. See Item 4: "Information on the Company-Business Overview-Regulatory Framework-The Gas Act and Our license-Penalties and Revocation." On September 17, 2002, the Argentine Government issued Decree No. 1,834/02 (which shall remain in effect as long as the Public Emergency Law is in effect), which provides that the filing of reorganization proceedings or a petition in bankruptcy by or against companies that are renegotiating their government-granted licenses as a result of the Public Emergency Law shall not lead to termination of the licenses of such companies.

As a general rule, upon the expiration of our license, we will be entitled to receive the lower of the following two amounts: (a) the net book value of our Essential Assets (including property, plant and equipment) determined on the basis of the price paid by Gas Argentino and the original cost of subsequent investments carried in U.S. Dollars and adjusted by the U.S. PPI, net of accumulated depreciation, and (b) the proceeds of a new competitive bidding process to acquire our license, net of costs and taxes paid by the successful bidder.

If our license is terminated by the Argentine Government prior to the expiration of its full term as a result of nonperformance by us, the Argentine Government may offset against our net book value any sum due to the Argentine Government for damages caused by the events resulting in the termination of our license. Such damages are required by our license to be at least 20% of the net book value of our assets. Alternatively, the Argentine Government could require Gas Argentino, our controlling shareholder, to transfer its holding of our shares to ENARGAS as trustee for their subsequent sale through a competitive bidding process. Compensation received by is in connection with a termination of our license may be insufficient to enable us to pay our obligations, including interest on and the principal amount of our financial indebtedness.

Argentine standards for disclosure and accounting differ from those of the United States and certain other countries. Therefore, information about us may not be as detailed or comprehensive as that of non-Argentine issuers, including that of United States companies.

Publicly available information about the issuers of securities listed on theBolsa de Comercio de Buenos Aires(Buenos Aires Stock Exchange, or the "BCBA") provides less detail in certain respects than the information that is regularly published by or about listed companies in the United States and certain other countries. In addition, regulations governing the Argentine securities market are not as extensive as those in effect in the United States and other major world markets. While we are subject to the periodic reporting requirements of the Exchange Act, the periodic disclosure required by foreign issuers under the Exchange Act is more limited than the periodic reporting disclosure required by listed United States issuers. Furthermore, there is a lower level of regulation of the Argentine securities markets and of the investors in such markets as compared with the securities markets in the United States and certain other developed countries. We prepare our financial statements in accordance with Argentine GAAP which differs in certain respects from U.S. GAAP.

The impact that Argentina's adoption of International Financial Reporting Standards ("IFRS") beginning with fiscal year ended December 31, 2012 will have on our financial results remains uncertain.

On December 29, 2009, theComisión Nacional de Valores(National Securities Commission, or "CNV") issued Resolution No. 562, adopting Argentine Federation of Professional Councils in Economic Sciences ("FACPCE") Technical Resolution No. 26: "Professional Accounting Standards: Adoption of International Financial Reporting Standards ("IFRS") of the International Accounting Standards Board ("IASB")" beginning with fiscal year ended December 31, 2012. In summary, this resolution states that:

All entities within the public offering regime of Law No. 17,811 are required to apply IFRS when preparing their financial statements. All other entities not covered or excluded therefrom may apply IFRS or other professional accounting standards issued by the FACPCE now or in the future.

Adoption of the IFRS is effective for financial statements beginning with fiscal year ended December 31, 2012 and for interim financial statements prepared during that year. Additionally, entities required to apply IFRS must prepare a note in their annual financial statements for the fiscal year ended December 31, 2011 detailing the expected impact of IFRS on their financial results.

The transition to IFRS will require us to make accounting, financial and operational changes. In this respect, on April 22, 2010, our Board of Directors approved our IFRS implementation plan. We are currently ending the evaluation of the IFRS implementation stage.

Therefore, as of the date of this annual report, although the IFRS implementation plan has progressed according to the approved plan, we cannot determine what will be the final impact of our adoption of IFRS and cannot guarantee its adoption will not have a negative effect on us. If the effects do prove to be negative, our financial position, results of operations and shareholder's equity could be adversely affected.

Risk Factors Relating to Controlling Shareholder

Since Gas Argentino owns a controlling majority of our shares, investors will not be able to affect the outcome of any shareholder vote.

Gas Argentino holds all of our shares of class A common stock, par value one Peso per share, or the "Class A Shares," representing 51% of our capital stock, and 49% of our shares of Class B common stock, par value one Peso per share, or the "Class B Shares," representing 19% of our capital stock. Gas Argentino has the power to determine the outcome of substantially all matters to be decided by a vote of our shareholders and to elect the majority of the members of our Board of Directors and the majority of the members of our Supervisory Committee. In addition, pursuant to our by-laws, or the "By-Laws" the Class A shareholders have the power to elect two of the three members of our Supervisory Committee. Accordingly, our other shareholders are not able to affect the outcome of any shareholder vote, including the election of our Board of Directors.

Our controlling shareholder, Gas Argentino, has filed a voluntary bankruptcy proceeding. This proceeding may lead to a change of control in our ownership which could require approval from ENARGAS. .

Gas Argentino's only assets are our Class A and B Shares. Therefore, its only source of funds for the payments of its obligations is dividends paid by us. However, pursuant to our restructuring agreement, our capacity to pay dividends to our shareholders is restricted. We cannot distribute dividends until December 31, 2013 and, even then can do so only if we have repaid at least US$ 75 million of our outstanding indebtedness. In addition, since 2002 we have accumulated deficits and pursuant to Article 71 of the Argentine Corporations Law, we cannot distribute dividends until we have recovered such deficits.

On May 11, 2009, Gas Argentino was notified of a bankruptcy proceeding filed by an alleged Gas Argentino creditor. Consequently, on May 19, 2009, Gas Argentino filed a voluntary bankruptcy proceeding (concurso preventivo) in a local Argentine court pursuant to Bankruptcy Law No. 24,522. As of the date of this annual report, the acceptance and verification period for petitions (verificaciones de crédito) by potential creditors has ended. The court-appointed supervisor (thesíndico concursal) submitted its report to the court regarding the potential petitions. On February 10, 2010, the Argentine court issued its decision on whether each respective petition was either accepted or rejected. On March 12, 2010, Gas Argentino challenged certain petitions accepted by the court on February 10, 2010. Additionally, certain creditors filed their petitions late (verificaciones tardías). On March 17, 2010, the court-appointed supervisor prepared and submitted to the court a report on Gas Argentino's general financial situation and reorganization proceeding. On April 29, 2010, the Argentine court proceeded to classify the claims in order of priority based primarily on the report of the court-appointed supervisor, establishing only one category for all the claims. On August 9, 2010, the Court extended the original term for Gas Argentino to submit its plan for reorganization, rescheduling all the deadlines to the ones established by the Court in MetroGAS'concurso preventivoproceedings.

If, as a result of such proceeding, Gas Argentino is declared bankrupt, its creditors could foreclose on its only asset, our Class A and B Shares. In that case, there would be a change of control in our ownership which would require the approval of the ENARGAS. We cannot assure you that ENARGAS will approve any such change.

Risk Factors Relating to our Subsidiary

MetroENERGÍA was constituted within the framework of Decree No. 180/04 issued by Executive Power, which authorized the natural gas distributors to have a controlling stake in natural gas markets. Changes in the legislation applicable to us may have a material adverse effect on our financial performance.

In February 2004, the Executive Power issued Decree No. 180/04 which allowed natural gas distributors to seek a controlling participating interest in gas marketing companies. Pursuant to Decree No. 180/04, the Energy Secretariat reserved the right to limit the market share of such gas distributing companies can hold in such gas marketing companies. These market share restrictions have not been imposed yet. However, no assurance can be given either that a limitation on the participation of gas distributors in gas marketing companies or in the market share of these marketing companies may not be put into place in the future.

Following Executive Orders No. 180 and No. 181 of February 13, 2004, the Energy Secretariat issued Resolutions No. 752/05 and 2,020/05, which established a schedule by which power plants, large customers, General Service "G" users, General Service "P" users, and CNG stations could start to purchase natural gas directly. This process was called "gas unbundling".

Consequently, with the goal of servicing large users of gas and gas transporters that were prohibited by law to be serviced by the licensed natural gas distribution companies, we constituted MetroENERGÍA S.A. On July 2005, ENARGAS granted us approval to operate MetroENERGÍA as a natural gas trading company. We currently have a 95% ownership interest in MetroENERGÍA, with BG Argentina S.A. ("BG Argentina") and YPF Inversora Energética S.A. (YPF Inversora") holding the remaining 2.73% and 2.27% ownership interests, respectively.

We cannot assure you that changes in the above mentioned regulations, or any future changes to the regulatory framework, would not materially and adversely affect us.

MetroENERGÍA operates in a highly competitive market.

One of the main objectives of MetroENERGÍA is to attract those industrial and commercial customers who must purchase natural gas in a deregulated market.

During 2007, MetroENERGÍA, entered into contracts with different gas producers for the supply of natural gas to those customers who must purchase gas from third-party suppliers. These contracts are renegotiated annually. MetroENERGÍA's current contracts expired on December 31, 2010. As of the date of the issuance of this annual report, the renegotiations have not yet concluded.

These gas supply agreements are specifically aimed at large customers, electric power plants, General Service "G" users and General Service "P" users, who are located not only in our distribution area but also in the rest of the country.

Additionally, MetroENERGÍA signed invoicing and collection agreements, which were originally effective until May 2008 and were renewed until May 2010, with some gas producers for selling natural gas to CNG stations pursuant to theMechanism of Natural Gas Allocation established under Resolutions No. 752/05, No. 2020/05, No. 1,070/08 and No. 275/06. These agreements can be renewed annually. As of the date of issuance of this annual report, the renegotiations have not yet concluded. We can give no assurance that such contracts will be renewed in the same conditions or that changes in the contractual conditions would not materially and adversely affect us.

Actions carried out through MetroENERGÍA allowed us to retain most of the industrial and commercial customers. No assurance can be given that MetroENERGÍA will be able to continue retaining such customers.

INFORMATION ON THE COMPANY

History and Development of the Company

General

We were formed on November 24, 1992 as asociedad anónima under the laws of Argentina for a duration of 99 years. Our legal name is MetroGAS S.A. and our commercial name is MetroGAS. We are domiciled in and are governed by the laws of Argentina.

Our administrative and registered office is located at Gregorio Araoz de Lamadrid 1360, (1267) Buenos Aires, Argentina. Our telephone number is (54)(11) 4309-1434. As of December 31, 2010, we employed approximately 1,039 people. We have several commercial offices in the city of Buenos Aires and in the greater Buenos Aires area. Since November 17, 1994, our Class B Shares have been listed on the BCBA and our American Depositary Shares, each representing ten Class B Shares, have been listed on the New York Stock Exchange. Our agent for service of process in the United States for matters relating to our ADSs listed on the New York Stock Exchange is CT Corporation System, 111 Eighth Ave., New York, NY 10011.

As part of our strategy, we implemented, and continued through 2001, a major capital expenditure program designed to extend and renovate pipelines, regulators, valves, and meters, to ensure the safety and reliability of our distribution system, to modernize and centralize our information systems, and to upgrade our customer service branch network. We made capital expenditures of approximately Ps. 524.9 million between 1993 and 2001. Due to the Argentine financial crisis and the pesification and freezing of our tariffs, beginning in 2002 we reduced our capital expenditures to amounts required to fulfill our license provisions and ensure safe operation of our gas distribution network. We made capital expenditures of approximately Ps. 221.7 million between 2002 and 2007. During 2010, 2009 and 2008, our capital expenditures were approximately Ps. 119.1 million, Ps. 105.8 million and Ps. 84.2 million, respectively. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Argentina" and Item 3: "Key Information-Risk Factors Relating to Us."

Important Events in the Company's Development

Privatization of Gas del Estado and Our Creation

Prior to being privatized, Gas del Estado, a state owned corporation formed by the Argentine Government, owned and operated virtually all natural gas transportation and distribution facilities in Argentina. Through high-pressure transportation pipelines measuring approximately 10,590 km in length, Gas del Estado transported gas from producing basins located primarily in western, northwestern and southern Argentina to distribution areas for delivery to customers.

Gas del Estado was privatized pursuant to the Gas Act, which was enacted in June 1992 and implemented through Decrees No. 1,738/92 and 1,189/92. The Gas Act established a new industry structure for natural gas transportation and distribution in Argentina. Gas del Estado's integrated functions of purchasing, processing, transporting, distributing, and selling gas were assumed by two newly created transportation companies and eight newly created distribution companies, each of which was licensed and regulated under a new regulatory framework. The Argentine Government successfully completed the privatization of Gas del Estado in December 1992 by transferring a majority of the common stock of all the gas distribution and transportation companies to the respective holding companies that were formed by the consortia that purchased them. The Argentine Government retained a portion of the equity in each new company ranging from 10% to 40%, including an original equity interest in us of 30%. The Argentine Government has sold much of such retained ownership in certain privatized gas transportation and distribution companies to the public (such as the November 1994 offering of our Class B Shares) or in private transactions (such as the January 1997 private sale of our remaining Class B Shares). The remainder of the Argentine Government's shares in us was transferred to our employees through an employee stock ownership plan known as thePrograma de Propiedad Participada ("PPP"). See Item 7: "Major Shareholders and Related Party Transactions-Major Shareholders."

The Argentine Government promulgated detailed bidding procedures governing the privatization of Gas del Estado. The Pliego contained these procedures, which required that the bidding group for a gas distribution company include, among its members, a designated technical operator with experience in operating a gas distribution company serving at least 500,000 residential customers. The technical operator was required to enter into a technical assistance agreement under which it would provide us with, among other things, certain technical and managerial assistance. See Item 4: "-Business Overview-Agreements with BG Group-Technical Assistance Agreement."

The Pliego required that each bid include a specific U.S. Dollar amount, payable partially in cash and partially in Argentine public, foreign and domestic debt securities, plus a fixed amount of US$ 62 million to be paid in cash on December 28, 1992, or the "Takeover Date," representing certain liabilities of Gas del Estado to the Argentine Government. After various rounds of bidding, a consortium, or the "Consortium," composed of British Gas plc, Perez Companc S.A., or "Perez Companc," Astra Compañia Argentina de Petroleo S.A., or "Astra" and Invertrad S.A., or "Invertrad," was successful with a bid of US$ 300 million plus the mandatory amount of US$ 62 million. As a result, the bidding price for the 70% majority interest in us amounted to US$ 362 million.

The Consortium formed Gas Argentino, to hold its interest in us. See Item 7: "Major Shareholders and Related Party Transactions-Major Shareholders." British Gas plc, or "British Gas," qualified as the technical operator, or the "Technical Operator," of the Consortium. See Item 4: "-Business Overview-Agreements with BG Group-Technical Assistance Agreement."

Pursuant to the privatization of Gas del Estado, we, along with the Argentine Government, Gas del Estado, British Gas, Perez Companc, Astra, Invertrad, and Gas Argentino entered into a transfer agreement, or the "Transfer Agreement," on the Takeover Date. The Transfer Agreement provided that those assets of Gas del Estado that are associated with the distribution system within our service would be transferred to us.

The Transfer Agreement required that (in addition to the bidding price paid by Gas Argentino) we assume certain short- and medium-term indebtedness of Gas del Estado in the aggregate amount of approximately US$ 110 million, consisting of obligations of US$ 60 million due to the Argentine Government and US$ 50 million due to YPF. We also executed three, short-term notes in the aggregate amount of approximately US$ 26 million to pay for certain inventory and receivables attributable to gas delivered by Gas del Estado prior to the Takeover Date. As of December 31, 1997, we had repaid the US$ 60 million debt to the Argentine Government, the US$ 50 million debt to YPF and the three short-term notes totaling approximately US$ 26 million. In addition, the Transfer Agreement provided that we would act as collection agent for certain overdue receivables owed to Gas del Estado. Accordingly, we were required to make a nonrefundable prepayment of US$ 23.8 million, which represented a minimum payment to be received by Gas del Estado on account of the overdue receivables.

Under the Transfer Agreement, we assumed certain obligations with respect to our new employees, who previously had been employed by Gas del Estado. We were required to accept these employees at their previous salary and seniority levels and to accept responsibility for any labor claims, occupational hazard claims and retirement liabilities that arose after the Takeover Date. We were required to cooperate in implementing the PPP to enable our employees to acquire the 10% of our shares that were originally held by the Argentine Government. In addition, our employees are entitled to participate in our annual profits by receiving an aggregate distribution equal to 0.5% of our earnings after taxes.

On January 20, 1993, Invertrad assigned its interest in the Consortium to Argentina Private Development Trust Co., Ltd., currently known as Argentina Private Development Co., Ltd., or "APDC." On November 12, 1993, British Gas transferred its interest in the Consortium and in Gas Argentino to British Gas Netherlands Holding B.V., or "BGNH," a wholly owned subsidiary of BG Group. On September 24, 1997, Astra acquired 100% of the shares of APDC. On August 11, 1998, Perez Companc transferred its interest in Gas Argentino to BGNH, Astra, and APDC on a pro rata basis based on their respective holdings. On August 30, 1999, BGNH transferred its interest in the Consortium and in Gas Argentino to British Gas International B.V., or "BGI," an entity ultimately controlled by BG Group. Astra merged with YPF effective January 1, 2001. On December 21, 2001, APDC transferred its interest in Gas Argentino to YPF. During fiscal year 2005, Gas Argentino shares were transferred as follows: (i) on October 31, 2005, YPF S.A. notified us of the transfer of all its shares in Gas Argentino to YPF Inversorsa Energetica S.A.; and (ii) on November 30, 2005, BGI notified us of the transfer of all its shares in Gas Argentino to BG Inversiones Argentinas S.A. On the date of this annual report, BG Group indirectly owns 54.67% of Gas Argentino, and YPF directly owns 45.33% of Gas Argentino.

Voluntary Reorganization Proceeding (Concurso Preventivo)

On June 17, 2010, we filed a petition for a voluntary reorganization proceeding (concurso preventivo) in an Argentine court to rehabilitate our financial condition. We are continuing to operate our business as a debtor-in-possession under a court-appointed supervisor (thesíndico concursal). On July 15, 2010, the Court heard our petition and implemented the following timeline: a) the end of the proof of claim period was fixed for November 10, 2010; b) the deadline by which thesindico concursalmust issue a report about each individual claim was fixed for February 22, 2011; c) the deadline by which we must establish classification of creditors' claims was fixed for April 20, 2011; d) the deadline by which thesindico concursalmust issue a report about MetroGAS' general financial situation was fixed for May 20, 2011; and e) the end of the exclusivity period, the period during which we may submit a proposal to each creditor individual, was fixed for March 9, 2012.

As of the date of the issuance of this annual report, the proof of claim period has expired and the deadline by which thesindico concursal must issue a report about each individual claim has passed. The report has been issued and the court has issued a resolution pursuant to Article No. 36 of the Bankruptcy Law, which approved said claims. The submission of the report by thesindico concursal about MetroGAS' general financial situation as well as the submission of the court resolution about the classification of MetroGAS' creditors' claims remain pending.

The debts included in the reorganization procedure, which may be subject to positive or negative adjustments after the corresponding proofs of claim, are set forth in MetroGAS' 2010 Balance Sheet in the current financial statements under the line-item "Reorganization Liabilities." These liabilities are considered long-term liabilities, given the aforementioned deadlines and the fact that the reorganization process has not yet ended. Long-term liabilities also include commercial, tax, financial and social debts, among others.

After the above mentioned court resolution is rendered, we will have 90 days to propose a reorganization plan to each class of creditors and obtain approval therefrom. If we obtain approval from (i) a majority of creditors in each class and (ii) that majority holds more than 66.6% of the outstanding obligations in each class, the proposed plan becomes the reorganization agreement. Such reorganization agreement would then limit our actions until the court declares us to be in full compliance with the terms thereof and the reorganization proceeding is officially terminated. Should we fail to fully comply with the terms of the reorganization agreement, our creditors can request and obtain a declaration of bankruptcy against us. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Us-Our filing for voluntary reorganization (concurso preventivo) under Argentine Law on June 17, 2010 makes us subject to the risks and uncertainties associated with such reorganization proceedings."

The Argentine Natural Gas Industry

The information concerning the Argentine natural gas industry set forth below has been prepared based on materials obtained from public sources, including Gas del Estado, the Energy Secretariat, public laws, decrees and regulations and other sources identified below. The information has not been independently verified by us or by our advisors.

Historical Background

Prior to the privatization of Gas del Estado, the Argentine gas industry effectively was controlled by the Argentine Government. From January 1944 to December 1992, the integrated system of transportation and distribution of natural gas was under the exclusive control of Gas del Estado and its predecessors. In addition, until 1990, YPF (formerly the state owned, Argentine oil company), directly or through contractors, was the only natural gas producer in Argentina.

The distribution assets of Gas del Estado were divided into nine systems on a geographical basis as specified in the license of each of the nine distribution companies. The Buenos Aires metropolitan area, the principal gas market in Argentina, was divided between two distribution companies, us and Gas Natural BAN S.A., or "BAN." We are the largest distribution company in Argentina (in terms of number of customers and volume of gas deliveries), with approximately 21.5% of the total deliveries made by all gas distribution companies in 2010. We serve a market area generally covering the southern and eastern portions of greater Buenos Aires, including the city of Buenos Aires. Camuzzi Gas Pampeana S.A. is the second largest distribution company in Argentina (in terms of volume of gas deliveries) with approximately 18.0% of the total deliveries made by all gas distribution companies in 2010; it serves the area covering the Province of Buenos Aires (excluding greater Buenos Aires). Camuzzi Gas del Sur S.A. is the third largest distribution company in Argentina (in terms of volume of gas deliveries) with approximately 14.4% of the total deliveries made by all gas distribution companies in 2010; it serves the market area generally covering southern Argentina. Litoral Gas S.A. is the fourth largest distribution company in Argentina (in terms of volume of gas deliveries), with approximately 11.8% of total deliveries made by all gas distribution companies in 2010; it covering the northwest of the Province of Buenos Aires. The remaining gas distribution companies in Argentina are Gas BAN, Gasnor S.A., Distribuidora de Gas del Centro S.A., Distribuidora de Gas Cuyana S.A. (whose respective service areas are located in northwestern and west-central Argentina), and Gasnea S.A. (serving the northeastern Argentina).

Gas del Estado's transportation assets were divided on a broad geographical basis into a northern and a southern trunk pipeline system designed to give both systems access to gas sources and to main centers of demand, including the greater Buenos Aires area. As a result of the division, our distribution system is directly connected to the southern trunk pipeline system operated by TGS, our primary gas transportation supplier. In addition, we are connected indirectly to the northern trunk pipeline system operated by TGN, through a large diameter, high pressure ringmain around Buenos Aires and through a pipeline of a neighboring distribution company.

Pursuant to the Gas Act and related decrees, each privatized company was granted a license to operate the transferred assets. Moreover, a regulatory framework for the privatized industry was established based on open, nondiscriminatory access. A regulatory agency named ENARGAS was created to regulate the transportation, distribution, marketing, and storage of natural gas in Argentina. The Gas Act also provided for the regulation of wellhead prices of gas in Argentina for a temporary period of one to two years beginning in June 1992, with prices to be deregulated no later than June 1994. Prior to deregulation, the regulated price was set at US$ 0.97 per MMBTU at wellhead, which had been the regulated price since 1991. In accordance with the Gas Act, the price of gas was deregulated as of January 1, 1994 and, from that date until the year 2002, the average price of gas we paid increased. However, the enactment of the Emergency Law in 2002(See Item 4: "Information on the Company- Regulatory Framework-ENARGAS-Current Tariffs") negatively impacted the natural wellhead prices of gas. Since mid-2004, the wellhead prices of gas for industrial consumers, thermal power generators and CNG stations have been gradually adjusted. On the other hand, it was not until 2008 that natural gas wellhead prices for residential and small commercial consumers were increased (which marked the first increase since 2002 for these consumers). Currently, the natural gas wellhead prices remain regulated in most cases.

Supply of and Demand for Natural Gas

Natural Gas Consumption and Demand

World demand for natural gas has increased significantly in recent years. Natural gas is distributed worldwide and is the only fossil fuel to have experienced reserve estimate increases in nearly every region of the world over the past decade. Due to lower alternate fuel and operating costs, natural gas has distinct economic advantages over other sources of energy such as coal and nuclear power. Furthermore, natural gas provides substantial environmental advantages compared to other energy sources because of its lower by product discharges. A 2010 United States Energy Information Administration international energy outlook forecasted a 49% increase in worldwide energy requirements from 2007 to 2035 and a 44% increase in worldwide natural gas consumption for the same period.

Argentina has a well-developed natural gas market, where natural gas constitutes approximately 52% of the total primary energy consumed. Since 1980, natural gas consumption in Argentina has increased approximately threefold, from approximately 9.3 BCM (328 BCF) in 1980 to 30.6 BCM (1,077 BCF) in 2010. These increases reflect energy substitution by end users, low prices relative to those for competing energy sources, and an increase in gas pipeline capacity. Also, in recent years, natural gas has experienced a significant rise in its share of the energy market. Demand for gas in Argentina is subject to significant seasonal variations with peak residential demand for heating occurring in the winter. Despite a relatively high market share of natural gas in Argentina, compared with other countries, we believe that additional market opportunities for natural gas exist in Argentina and that demand for natural gas will increase in conjunction with any growth of the Argentine economy.

The following table sets forth the total Argentine consumption of natural gas by class of user as of December 31 for the calendar years indicated:

	Consumption of Natural Gas
	1990	2000	2005	2007	2008	2009	2010
Residential
MMCM	4,346	6,967	7,432	9,000	8,521	8,481	9,244
BCF	153	246	262	318	301	300	326
Commercial
MMCM	521	1,053	1,109	1,241	1,207	1,277	1,254
BCF	18	37	39	44	43	45	44
Industrial
MMCM	6,114	8,055	9,169	9,843	10,028	9,326	9,613
BCF	216	284	324	347	354	329	339
Electric power plants
MMCM	5,319	7,141	7,213	7,856	7,789	7,578	6,672
BCF	188	252	255	277	275	268	236
Government entities
MMCM	1,054	340	403	422	402	406	427
BCF	37	12	14	15	14	14	15
CNG(a)
MMCM	218	1,677	3,167	2,858	2,728	2,633	2,652
BCF	8	59	112	101	96	93	94
Others
MMCM	207	293	454	583	588	593	645
BCF	7	10	16	20	21	21	23
Total
MMCM	17,779	25,526	28,947	31,803	31,263	30,294	30,507
BCF	627	901	1,022	1,122	1,104	1,070	1,077

Notes:

(a) Primarily used for automobiles.

Sources: Argentine Energy Secretariat 1992 annual report, 1985 and 1991 Yearbooks of Gas del Estado. Data 2000, 2005, 2007, 2008, 2009 and 2010 were compiled from information provided by CAMMESA and ENARGAS.

Gas Supplies

In 2009, Argentina had proven natural gas reserves estimated at 378,820 MMCM (13,378 BCF) with an estimated reserve life of nine years. In 2008, Argentina had proven natural gas reserves estimated at 398,529 MMCM (14,074 BCF) with an estimated reserve life of nine years. Most of the reserves have been discovered as a result of oil exploration activities. Total domestic natural gas production was 43,295 MMCM (1,529 BCF) in 2010, 48,418 MMCM (1,710 BCF) in 2009 and 50,309 MMCM (1,777 BCF) in 2008. There are 19 known sedimentary basins in Argentina, ten of which are located entirely onshore, six of which are combined onshore/offshore and three of which are entirely offshore. Oil and natural gas production is concentrated in five basins: Noroeste in northern Argentina, Neuquen and Cuyana in west central Argentina and Austral, and Golfo San Jorge in the south of Argentina (which includes onshore and offshore fields). The major natural gas-producing basins are Noroeste, Neuquen, and Austral, which together contain approximately 88.0% of Argentina's proven natural gas reserves and accounted for approximately 88.7% of Argentina's natural gas production in 2010. In certain basins, the availability of natural gas is limited by production, transportation, and processing constraints. See Item 4: "-Business Overview-Commercial Contracts-Gas Transportation Contracts." TGS transports natural gas from the Neuquen, the Austral, and the Golfo San Jorge basins. Natural gas transported by TGN is extracted from the Neuquen, the Noroeste, and other natural gas basins in Bolivia. Neither TGS nor TGN is directly connected to the Cuyana gas basin. Of the natural gas purchased by us during 2010, approximately 66.9% originated in the Neuquen basin, and the remaining 33.1% originated in the Austral and Golfo San Jorge basins.

Argentine natural gas reserve data is estimated as of December 31, 2009 and production data is estimated as of December 31, 2010. The following table sets forth the location of the principal natural gas-producing basins supplying the Argentine natural gas market.

	Gas Producing Basins
Basin	Location by Province	Proven Gas Reserves(a)		Production		Estimated Reserve Life(b)

		(MMCM)	(BCF)	(MMCM)	(BCF)	(years)
Neuquen	Neuquen, Rio Negro, LaPampa, Mendoza (west-central)	157,611	5,566	23,817	841	7
Noroeste	Salta, Jujuy, Formosa (northwest)	61,845	2,184	4,984	176	12
Austral	Tierra del Fuego, Santa Cruz (south)	114,041	4,027	9,593	339	12
Golfo San Jorge	Chubut, Santa Cruz (south)	44,398	1,568	4,847	171	9
Other Areas		925	33	54	2	17
Total		378,820	13,378	43,295	1,529	9

Notes:

(a) There are numerous uncertainties inherent in estimating quantities of proven reserves and in projecting future rates of production. The reserve data set forth in this annual report represents only estimates. Reserve engineering is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. The results of drilling, testing and production after the date of an estimate may cause a substantial upward or downward revision of such estimate. Accordingly, reserve estimates may be materially different from the quantities of natural gas that ultimately will be recovered.

(b) In addition to the uncertainties inherent in estimating quantities of proven reserves, estimates of reserve life are based in part on certain assumptions of production and demand, which due to many uncertainties inherent in the domestic and world energy markets, may not accurately reflect future levels.

Source: Argentine Energy Secretariat 2010 and 2009 annual report.

Total Domestic Production. Total Argentine natural gas production during 2010 was 43,295 MMCM (1,529 BCF), a decrease of 10.6% over 2009. At December 31, 2009, total Argentine natural gas proven reserves were 378,820 MMCM (13,378 BCF).

Neuquen Basin. The Neuquen basin is the largest of the Argentine basins. The Neuquen basin is located in west central Argentina and is strategically located in relation to Buenos Aires, Argentina's principal natural gas market. It has an exploitable surface area of more than 100,000 km² and is one of our major supply sources. At December 31, 2009, the Neuquen basin accounted for approximately 41.6% of the Argentina's proven natural gas reserves. In 2010, the Neuquen basin produced an aggregate average of 65.3 MMCM (2.3 BCF) of natural gas per day, or 55.0% of the total Argentine natural gas production.

Noroeste Basin. At December 31, 2010, the Noroeste basin in northwestern Argentina produced an average of 13.7 MMCM (0.5 BCF) of natural gas per day, or 11.5 % of total Argentine natural gas production. As of December 31, 2009, this basin accounted for approximately 16.3% of Argentina's proven natural gas reserves.

Austral and Golfo San Jorge Basins. At December 31, 2010, the Austral and Golfo San Jorge basins, located in the extreme southern region of Argentina, produced an average of 39.6 MMCM (1.4 BCF) of natural gas per day, or 33.4% of the total Argentine natural gas production. In the Austral basin, which at December 31, 2009 accounted for approximately 30.1% of Argentina's proven natural gas reserves, exploration has centered in and around the basin's existing gas fields and other fields located offshore. The Golfo San Jorge basin is primarily an oil-producing basin.

Natural gas imports. Since 2004, Argentina has undergone a natural gas shortage as the production of natural gas has stagnated due to the lack of incentives and price signals and, in turn, has not been able to accommodate the substantial increase in demand. The gap between gas supply and demand has been covered by natural gas imports from Bolivia beginning in 2004, and also by imports of liquified natural gas (LNG) transported in vessels. The cost of the imported natural gas substantially exceeds the price levels the Government has set in the domestic market.

Business Overview

General

We are Argentina's largest natural gas distribution company (in terms of number of customers and volume of gas deliveries) according to ENARGAS' 2010 annual report. We have approximately 2.2 million customers in our service area (the city of Buenos Aires and southern and eastern greater metropolitan Buenos Aires). This area is densely populated with major dual-fuel electric power plants and industrial and commercial customers of natural gas. We are one of nine natural gas distribution companies formed in connection with the privatization of Gas del Estado.

The results of operations vary significantly from season to season, with our sales and operating income being significantly higher during the winter months (March through September). During 2010, sales of natural gas to residential customers accounted for approximately 45.9% of our total sales. The remainder of our sales of natural gas and transportation and distribution services was to industrial and commercial customers and governmental entities, power plants and suppliers of, and dealers in CNG, which is used as vehicle fuel. For a further description of the principal markets in which we compete, see Item 4: "Information on the Company-History and Development of the Company-The Argentine Natural Gas Industry" and Item 5: "Operating and Financial Review and Prospects-Operating Results."

Our distribution system consists of approximately 16,493 km of mains. We purchase natural gas primarily from producers in southern and western Argentina. Gas purchased is transported through Argentina's two trunk pipeline systems, one of which is operated by TGS and the other by TGN.

In the 1992 privatization of Gas del Estado, the Argentine Government granted us a 35-year license, extendable for ten years under certain conditions, giving us the exclusive right to distribute natural gas within our designated service area. We are regulated by ENARGAS, an agency of the Argentine Government, which has broad authority over the gas distribution and transportation industries, including their tariffs. The Gas Act provides that the tariffs for natural gas that we charge to end users shall consist of the sum of three components: (i) the price of gas purchased; (ii) the transportation tariff for transporting gas from the production area to the distribution system; and (iii) the distribution tariff established by ENARGAS. Our license provides for the semiannual adjustment of our tariffs as a result of changes in the U.S. PPI and in certain other circumstances. The Gas Act and our license provide that these tariffs will be adjusted every five years pursuant to a "price cap with periodic review" methodology, a type of incentive regulation that allows regulated companies (i) to retain a portion of the economic benefits arising from efficiency gains and (ii) to recover the cost of and reasonable return any investments made by them. The Public Emergency Law converted our U.S. Dollar-denominated tariffs into Pesos at an exchange rate of Ps. 1.00 per US$ 1.00, and superseded and suspended a number of these provisions. See Item 4: "-Regulatory Framework."

Business Strategy

In response to the Argentine economic crisis, at the beginning of 2002 we refocused our strategy on short-term risks and challenges. Since then, our short-term strategy has aimed at working with the Argentine Government to expedite decisions and obtain tariff increases that ensure the continuity of our operations, maintenance of safety and quality standards, and coverage for debt repayment. See Item 4: "-Regulatory Framework-Tariffs-Renegotiation of the Tariffs."

Our management also has taken and continues to take actions to mitigate the impact of the current economic crisis, including:

(1) strict management of cash-flow to adjust our financial expenditures to the funds available to us;

(2) reduction of capital expenditures and preventive maintenance programs without affecting our ability in the near term to serve our customers safely or operate our network in accordance with quality and environmental standards;

(3) tight control of all price adjustment requests from suppliers and required extensions of payment terms from those suppliers;

(4) renegotiation of commercial and operational contracts; and

(5) securing any necessary tax advice to make the best possible tax use of past and future tax losses.

Pre-crisis, we had implemented a strategy that included capital investments and other measures designed to: (a) provide continued high-quality service to our customers; (b) ensure sustained growth in dividends; (c) achieve a significant reduction in operating expenses; (d) implement a market strategy more closely based on market analysis; (e) improve the use of our current transportation capacity and become a key participant in the natural gas transportation market; (f) further develop the CNG market; (g) continue to preserve the environment; (h) develop our human resources; and (i) generate an organizational culture based on excellence.

Although constrained by the risks and circumstances described in Item 3: "Key Information-Risk Factors" our long-term strategy is to maintain and enhance our position in the energy market in Argentina. We continue to participate actively in the domestic energy market, focusing on providing efficient and reliable natural gas service to our customers and on being the country's most innovative provider of natural gas distribution services and related products.

Since commencing operations, our management team has concentrated on controlling operating costs and improving operating efficiency and collections. Between December 31 of 1992 and 2010, we downsized from 2,021 to 1,039 employees. In addition, we renegotiated service contracts with independent suppliers and outsourced various services.

MetroENERGÍA

In February 2004, the Executive Power issued Decree No. 180/04 which authorized natural gas distributors to hold a controlling participating interest in gas marketing companies. See "Item 3: Key Information - Risk Factors - Risk Factors Relating to our Subsidiary - MetroENERGÍA was constituted within the framework of Decree No. 180/04 issued by Executive Power, which authorized the natural gas distributors to hold a controlling interest in gas marketing companies. Changes in the legislation applicable to us may have a material adverse effect on our financial performance." Pursuant to Decree No. 180/04, the Energy Secretariat reserved the right to limit the market share of such gas marketing companies. These market share restrictions have not been imposed yet. However, no assurance can be given either that a limitation on the participation of gas distributors in gas marketing companies or on the market share of these marketing companies may not be put into place in the future.

One of the main objectives of MetroENERGÍA is to attract those industrial and commercial customers who must purchase natural gas in a deregulated market.

During 2007, MetroENERGÍA entered into contracts with different gas producers for the supply of natural gas to those customers who must purchase gas from third-party suppliers. These contracts are renegotiated annually. MetroENERGÍA's current contracts expired on December 31, 2010 and as of the date of issuance of this annual report, new contracts have not yet been renegotiated.

Additionally, MetroENERGÍA signed invoicing and collection agreements, which were originally effective until May 2008 and were renewed until May 2011, with some gas producers for selling natural gas to CNG stations pursuant to theMechanism of Natural Gas Allocation established under Resolutions No. 752/05, No. 2020/05, 1,070/08 and No. 275/06. These agreements can be renewed annually. As of the date of the issuance of this annual report, the renegotiations have not yet concluded.

On June 14, 2007, Resolution No. 599/07 of the Energy Secretariat was published in the Official Gazette, approving the draft Agreement with Gas Producers 2007-2011 (the "Agreement 2007-2011"). It was subsequently ratified by the gas producers and came into effect on August 1, 2007. The Agreement 2007-2011 governs and regulates the supply of natural gas by gas producers to gas distribution companies (who in turn distribute gas to residential users, small businesses, industries, CNG refueling stations and power plants) for the period between August 1, 2007 and December 31, 2011. The Agreement 2007-2011 sets forth regulations depending on the type of consumer and indicates the volumes, basins and point of entry to the transportation system to be observed by each gas producer. Gas producers, however, are free to decide whether to channel their gas supply directly or through third parties. Since MetroENERGÍA has entered into gas purchase contracts with the gas producers, the Company, through MetroENERGÍA, was able to sign gas supply agreements with industrial and commercial customers both within and outside of our distribution area at the renewed prices and volumes set forth in the Agreement 2007-2011.

Revenues

Our consolidated sales during the year ending December 31, 2010 increased by 4.5%, amounting to Ps. 1,122.3 million compared to Ps. 1,074.2 million in the previous year. Sales increased during the year ended December 31, 2010 mainly due to MetroENERGÍA's trading on its own behalf.

MetroENERGÍA's trading of natural gas on its own behalf amounted to 37.4% of its operations; trading natural gas on behalf of third parties amounted to 62.6%. MetroENERGÍA receives a fee for its third-party trading activities, which is included under "Sales" in the Statement of Operations.

The following table illustrates certain information regarding our services to our customers during 2010:

	Information Regarding Services to Customers in 2010
	Volume (MMCM)	Volume (MMCF)	Percentage of Volume (a)	Sales (in millions Pesos)	Percentage of Sales	Number of Customers (b)

Category of Customer
MetroGAS
Gas Sales
Residential	1,940.7	68,533.8	24.6	515.3	45.9	2,128,126
Industrial, commercial and
Governmental	469.0	16,563.7	6.0	89.0	7.9	80,990
Transportation and Distribution Services
Electric power plants	3,373.0	119,116.9	42.8	88.3	7.9	5
Industrial, commercial and
Governmental	834.6	29,473.7	10.6	64.9	5.8	474
Compressed natural gas	553.6	19,551.1	7.0	36.7	3.3	361
Processed natural gas	141.3	4,990.0	1.8	48.8	4.3	2
Other Gas Sales and Transportation and Distribution Services	570.6	20,149.5	7.2	46.1	4.1	1
Subtotal MetroGAS	7,882.8	278,378.7	100.0	889.1	79.2	2,209,959
MetroENERGÍA
Sales on own behalf	768.5	27,138.9	100.0	221.2	19.7	1,049
Selling commission	-	-	-	12.1	1.1
Subtotal MetroENERGÌA	768.5	27,138.9	100.0	233.3	20.8	1,049

Total				1,122.3	100.0	-

Notes:

(a) Percentages of all gas delivered.

(b) Some of our users have multiple facilities. As a result, the number of facilities to which we supply gas is greater than the number of our customers.

The following is a brief description of the principal categories of our users and the class of service most often provided to users in each category.

Residential Customers

We provide service to approximately 2.1 million residential customers within our service area, approximately 63% of whom are located in the city of Buenos Aires. In 2009, sales to residential customers accounted for 23.3% and 48.6% of the volume of natural gas we delivered and our sales, respectively. During 2010, sales to residential customers accounted for 24.6% and 45.9% of the volume of natural gas we delivered and our sales, respectively. Our volume of sales to residential customers decreased from approximately 2.0 BCM (71 BCF) in 2009 to approximately 1.9 BCM (66 BCF) in 2010. We added 30,811 and 33,520 (net) new residential customers in 2009 and 2010, respectively. Residential customers receive residential service and pay the tariff for that class of service. Our tariff schedule is structured so that residential customers pay a higher tariff per unit of consumption than other groups due to the lower load factor and higher operating costs associated with these customers. Under our license, we generally are required to provide continuous uninterrupted service to residential customers. No written contracts are required to obtain residential service. The tariff for residential customers consists of a fixed charge per invoice and a charge per unit of consumption.

On April 29, 2004, the Energy Secretariat issued Resolution No. 415/04 ("Pure Program"), pursuant to which residential, commercial and small industrial users receive certain discounts or are surcharged for their consumption of natural gas. In 2004, users, who consumed less than 90% of the amount of gas they used during the same invoiced period in 2003, received a discount equal to 10% to 12% on the cost of their annual natural gas consumption; users, who consumed above 95 percent of the gas they consumed during the same invoiced period of 2003 paid a surcharge on the gas they consumed over the 95% level. On April 11, 2005, the Energy Secretariat issued Resolution No. 624/05, which extended Resolution No. 415/04. Pursuant to Resolution No. 624/05 residential, commercial, and small industrial users receive certain discounts or are surcharged in accordance with their consumption of natural gas. In 2006, users, who consumed less than 90 or 95% of the amount of gas they consumed during an equivalent period in 2003, depending on the type of user, and adjusted for the average temperature during each period, received a discount equal to one cubic meter per each cubic meter saved below those levels. Users whose consumption is above 90 or 105%, depending on the type of user, paid a surcharge on the gas they consume over those levels. The program is effective from April 15 until September 30 each year. This period however, could be modified by the Energy Secretariat as the program evolves. These resolutions were similarly applied in 2006 and 2007.

In 2008, ENARGAS instructed us, through Notes No. 9,200/08, No. 9,314/08 and No. 9,921/08, not to apply the Pure Program described above between April and September 2008 under the conditions laid out for 2008. Instead, we were instructed to apply the program under the terms and conditions in force for 2007, as a result of the large number of claims made by consumers affected by the Program. As explained by ENARGAS, the increasing number of complaints led it to begin a comprehensive examination of the Program. As a result of said instruction from ENARGAS, we were compelled to re-invoice the Program and/or give back creditbalances in certain cases.

On February 13, 2004, the Executive Power approved Decree No. 181/04, which divided residential tariffs into three categories (R1, R2, and R3), according to the level of annual gas consumption. Transportation and Distribution tariffs remained the same.

On June 8, 2005, ENARGAS temporarily approved through Resolution No. 3,208, the tariff chart (expressed in Pesos) applicable from May 1 to June 30, 2005. On July 12, 2005, ENARGAS temporarily approved through Resolution No. 3,227, a new tariff chart that replaced the one approved by Resolution No. 3,208, applicable from May 1 to June 30, 2005.

On March 21, 2006, ENARGAS, in Resolution No. 3,462 temporarily approved the tariff chart applicable retroactively from July 1, 2005, that contained the values of the price of gas at wellhead, as a result of the agreement signed between the Energy Secretariat and natural gas producers for the implementation of the schedule for the normalization of the price of gas at points of entry into the transportation system.

On September 1, 2008, residential service tariffs were divided into 8 new sub-categories (R1, R2-1^st, R2-2^nd, R2-3^rd, R3-1^st, R3-2^nd, R3-3^rd y R3-4^th), according to each sub-category's annual natural gas consumption.

On October 10, 2008, through Resolution No. I/446, ENARGAS established new tariffs for customers applicable from September 1, 2008, except for compressed natural gas or CNG, for which the new tariffs were to be applied from October 1, 2008. On December 23, 2008, we were notified, through Resolution No. I/556, that new tariff charts would be applied from November 1, 2008. However, the new tariff charts do not provide for making up for the distribution service tariffs.

On December 23, 2008, ENARGAS, through Resolution No. 566/08, approved new tariffs for the following categories: R3-1^st, R3-2^nd, R3-3^rd and R3-4^thas a result of an additional increase in the price of natural gas at wellhead.

On November 27, 2008, the Executive Power approved Decree No. 2,067/08 (published in the Official Gazette on December 3, 2008) which created theFondo Fiduciario para Atender a las Importaciones de Gas (Trust Fund for Gas Imports), a fiduciary fund established for the purpose of importing natural gas. This fund aims to complement the domestic gas production in order to decrease the number of "cut days" and thus guarantee the supply of natural gas in the domestic market. The charge is applied to industrial customers and residential customers in the following sub-categories: R3-1^st, R3-2^nd, R3-3^rd, R3-4^th. During 2009, as a consequence of several complaints from customers about considerable increases in their invoices, the Government implemented the following solutions: from May 1to September 30, residential customers categorized as R3-1^st and R3-2^nd were not charged with the Trust Fund for Gas Imports; from June 1 to July 31, residential customers categorized as R3-3^rd and R3-4^th were not charged with the Trust Fund for Gas Imports; from August 1 to September 30, only 30% of the Trust Fund for Gas Imports was applied to residents categorized as R3-1^st, R3-2^nd, R3-3^rd and R3-4^th; and only from October 1 onwards was the full tariff applied to all R3 customers. During 2009, ENARGAS and the Energy Secretariat also agreed not to apply the Pure Program due to similar complaints from customers about increases in their invoices.

Power Plants

Sales of transportation and distribution services to power plants increased by 9.2% during the year ended December 31, 2010 as compared to the previous year, mainly due to the 8.3% decrease in gas volumes delivered and to the decrease in the average price of said services.

Our contracts with electric power plants usually contain provisions, known as ship-or-pay provisions, which require the power plant to pay for reserved transportation capacity whether or not used. The ship-or-pay provisions guarantee us a minimum income.

Our generating plant customers have installed combined cycle technology. While electric generating plants with combined cycle technology require less natural gas than open cycle generating plants to generate the same amount of electricity, we estimate that the combined cycle generating plants greater operating efficiency will increase their dispatch under the rules of CAMMESA. The combined cycle technology uses diesel as an alternative fuel instead of fuel oil. For that reason, and as a consequence of the lower cost of natural gas compared to the cost of an energy equivalent amount of diesel, we believe that demand for natural gas from our electric generating customers has remained at a steady rate. The following combined cycle plants located in our service area have been our customers since the following dates: Central Termica Buenos Aires ("CTBA")-1995; Central Costanera-1998; Central Puerto-1999; and Dock Sud-2001. Since 2001, we have also provided transportation services to the marketer supplying natural gas to A.E.S. Parana, a combined cycle plant located outside of our service area. In the course of 2008, we signed a contract with GENELBA to provide transportation services from June 1, 2009 through December 31, 2019.

The combined cycle power plants contract for firm transportation and distribution service with a peaking arrangement that allows us to interrupt service during periods of high demand and insufficient transportation capacity or gas supply in order to ensure uninterrupted service to our residential customers. The power plants pay lower tariffs than those permitted by our license, which encourages development of new central power stations in MetroGAS' service area. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Us-Our revenues may be adversely affected by the right of our clients to bypass our services."

Our lower margin provision of transportation and distribution services to power plants during spring and summer, when demand for residential service becomes lower, covers a portion of our annual firm transportation costs. See Item 4: "-Commercial Contracts-Gas Transportation Contracts."

Until 2005, most of our power plants and industrial customers purchase gas directly from gas suppliers. This gas was delivered using our firm transportation capacity and our distribution services, thereby allowing us (a) to avoid incurring gas purchase costs (and possible take-or-pay charges) and (b) to collect a tariff from these customers, thereby defraying all or part of the cost of our firm transportation capacity. These arrangements also allowed us to achieve savings by avoiding (i) the cost of purchasing the gas that was used as compression fuel, which, pursuant to the regulatory framework, cannot be passed on to customers and (ii) certain gross turnover taxes imposed on our sales of gas. Under such arrangements, all these customers purchased our distribution and transportation services. See Item 4: "-Business Overview-Bypass Rights and Competition."

Due to the new Government-approved regulatory system, we have not been allowed to make gas sales to power plants since September 2005. During 2005 and 2006, natural gas was provided partly by MetroENERGÍA S.A.

Under the regulatory system governing the Argentine electricity industry, electricity-generating plants are dispatched in ascending order of marginal cost of generation to enable the national electricity system to operate at the lowest possible cost. Hydroelectric generating plants have the lowest marginal cost of generation in the national electricity system. Therefore, higher marginal cost power plants, such as thermoelectric plants (including our power plant customers), will not have their output dispatched to the extent hydroelectric power is available. In addition, above average rain or snowfall, which permits relatively greater dispatch of power by hydroelectric generating stations, will tend to decrease the dispatch of our power plant customers and therefore, their consumption of gas; the result is less delivery of our gas to them. Conversely, any event that increases the demand for natural gas for electric power generation, such as below average rainfall or snowfall which limits hydroelectric power generation, will increase the dispatch of our power plant customers and benefit us. The consumption of electricity in Argentina decreased by 24.0% between 2007 and 2008, mainly due to the reduction of economic activity in Argentina, increased by 35.0% between 2008 and 2009 and increased by 3.9% between 2009 and 2010.

According to CAMMESA, of Argentina's total electricity consumption during 2010, about 57.4% was generated by thermal power plants; approximately 34.8% was generated by hydroelectric power plants; approximately 5.8% was generated by nuclear power plants; and about 2.0% was imported.

Two new combined cycle electric power stations were completed in December of 2009. These power plants are highly efficient and are located outside of our service area and therefore do not form part of our customer base. Consequently, the presence of these new plants could result in a decrease of our sales.

In October 2009, the Energy Secretariat, through Note No. 6,866, established a voluntary program for generation companies who wanted to participate in a "Temporary Centralized Dispatch" ("Procedimiento para el despacho de gas natural para la generación eléctrica"). Pursuant to this program, participating natural gas producers give their available natural gas production to CAMMESA, which in turn selects the central electrical power plants which will receive this natural gas. Consequently, it would impact MetroGAS' sales, which would increase if CAMMESA chooses power plants inside MetroGAS' service area and decrease if CAMMESA chooses plants outside of MetroGAS' service area. It would also impact MetroGAS' penalties, depending upon whether MetroGAS complies with those deliveries or not. Although this program is voluntary, all of MetroGAS' power plant customers participate.

Industrial and Commercial Users and Government Entities

Our sales to industrial, commercial, and governmental customers increased by 9.3% during the year ending December 31, 2010 compared to the previous year, mainly due to the 2.7% increase in gas volumes delivered to this customer category. Our customers include major industries such as glass, food, chemical, and paper producers. Some use natural gas as a raw material or have continuous specialized processes that depend on a constant supply of natural gas in support thereof.

Industrial customers that consume at least 10.0 MCM (353 MCF) per day are permitted, subject to the availability of firm capacity, to contract for large volume firm service. The tariff for such service includes a transportation charge per unit consumed, a fixed charge per invoice, and a demand charge. Our demand charges allow us to recover the demand charges levied by transportation companies for specific amounts of firm transportation capacity reserved by us. Industrial customers are billed monthly.

Smaller industrial users that consume a minimum of 1.0 MCM (35 MCF) per day may contract for large volume general service ("SGG"). The related tariff includes a demand charge, a distribution charge, transportation charge and a charge per unit of consumption from one of two rate blocks, as well as a fixed charge per invoice.

Customers with a minimum consumption of 3.0 MMCM (106 MMCF) per year and whose operating processes are interruptible or whose natural gas can be substituted with other sources of energy, have the right to contract for large volume interruptible service. We have the right to interrupt service under these contracts. We currently operate a program that combines firm and interruptible service for large industrial customers, which includes agreements that allow us to ask for interruptions on firm services during 30 days in the winter. The interruptions generally are due to insufficient transportation capacity or gas supply at times of peak demand and are imposed to assure the provision of services to non-interruptible customers, such as residential customers. See Item 4: "-Bypass Rights and Competition."

In light of Resolution No. 752/05, modified by Resolution No. 2,020/05 and 275/06 and enacted to regulate the Executive Power Decree No. 181 that prohibits us from selling natural gas to specified industrial, commercial, and large-user clients, it was possible for MetroENERGÍA to capture power plants, large customers, General Service "G" users, and General Service "P" users to maintain a market share in sales (including consumption in our distribution area) among these categories of clients. Several client meetings and discussions took place in the last months of 2009, extending our sales to December 31, 2010.

We also supply gas to minor commercial and industrial users (e.g., restaurants, hotels and small industries) that consume less than 0.18 MMCM (6 MMCF) per year. These users receive small volume general service which is available to any nonresidential user. The tariff for this distribution and transportation service consists of a charge per unit of consumption, with three different rate categories based on the customer's usage, as well as a fixed charge per invoice.

As in the case of residential customers, Decree No. 181/04 established the division of minor commercial and industrial users into three categories (SGP 1, SGP 2, and SGP 3) according to their consumption levels. The same tariffs will apply to transportation and distribution services for the three categories until completion of the process of renegotiation of public services tariffs, at which time different tariffs are to be established on the basis of these users' consumption. We do not supply natural gas to SGP 3 clients with annual consumption over 0.18 MMCM (6MMCF) per year as they purchase it directly from third parties.

On April 29, 2004, the Energy Secretariat issued Resolution No. 415/04 ("Pure Program"), pursuant to which residential, commercial, and small industrial users receive certain discounts or are surcharged in accordance with their consumption of natural gas. On April 11, 2005, the Energy Secretariat issued Resolution No. 624/05, which extended Resolution No. 415/04. For a more detailed discussion of the discounts and surcharges of the Pure Program, see Item 4: "―Residential Customers."

Compressed Natural Gas ("CNG") Service

Beginning in April 2006, as a consequence of the "unbundling," we started to provide only transportation and distribution services ("trading" services) to CNG stations.

Beginning in 2004, CNG customers have been required to contract for firm or interruptible capacity, according to service categories created by Decree No. 180/04. The tariff for CNG users consists of a fixed charge per invoice, a charge per unit consumed, and a demand charge. The volume of transportation firm capacity of the segment decreased by 6.4% with respect to the volumes contracted for in December 2009 (from 2.50 MMCM to 2.35 MMCM per day).

Our transportation and distribution sales to CNG stations decreased by 2.9% during the year ending December 31, 2010 compared to the previous year, mainly due to the decrease of 1.1% in gas volumes delivered to this customer category.

During 2010, a new auction for providing natural gas to a CNG refueling station was held. ENARGAS Resolution No. 1,174/10 extended the effects of ENARGAS Resolution No. 3,569/06, by which the Regulator ordered the distribution companies to ensure that those CNG stations who contracted for interruptible service capacity receives a minimum daily volume until April 30, 2011. The total amount of natural gas assigned to CNG stations was 2.42 MMCM per day. Furthermore, during 2010, gas distribution companies had to again represent CNG filling stations in their natural gas applications before the Electronic Gas Market ("EGM"). This auction for the purchase of natural gas by CNG filling stations within EGM occurred in October 2010.

Processed Natural Gas Service

We were party to a contract with TGS from 1996 through 2000 under which TGS produced and sold in exchange for our account liquids extracted from gas that we delivered to the TGS processing plant at Bahia Blanca, Province of Buenos Aires. During 2001, some natural gas producers began operating a new gas processing plant in southern Argentina. As a result of the extraction by the new plant of natural gas liquids from gas subsequently delivered to us, beginning in 2001, we have delivered gas to the TGS processing plant containing lower volumes of associated liquids than were contained in the gas we delivered in prior years; in turn, TGS has extracted lower volumes of liquids from this gas than in the past. We have negotiated with TGS a reduced fee for processing the gas we deliver to its processing plant. Sales of gas for processing during the year ending December 31, 2010 remain constant compared to the previous year, mainly due to a decrease in the average prices partially offset by an increase of 2.2% in volumes delivered.

MetroENERGÍA sales

MetroENERGÍA's natural gas and transportation sales increased from Ps. 184.4 million during the year ending December 31, 2009, to Ps. 221.2 million during the year ending December 31, 2010, mainly as a result of a 28.1% volume increase in gas delivered to customers. During 2010, gas volumes delivered by MetroENERGÍA corresponding to sales on its own behalf amounted to 768.5 MMCM, compared to the 600.1 MMCM delivered in 2009; meanwhile, gas volumes corresponding to sales on behalf of third parties reached 458.7 MMCM, compared to the 526.0 MMCM delivered during 2009. Commissions for MetroENERGÍA's operations on behalf of third parties decreased from Ps. 15.9 million during 2009 to Ps. 12.1 million during 2010, due to the expiration of certain invoicing and collection agreements which MetroENERGÍA had signed with natural gas producers for the delivery of their product to CNG filling stations.

Throughput Experience

Gas distribution companies are required to pay for all contracted firm transportation capacity regardless of whether it is utilized. They are prohibited from passing on to customers, via tariffs, the cost of unused firm transportation capacity. Therefore, we strive to achieve the highest possible load factor, meaning the highest possible percentage of the firm transportation capacity for which we have contracted. Our management believes that the large number of our residential customers, who account for most of our sales during the peak winter months, and our large base of industrial and power plant customers, which can be served on an interruptible basis throughout the winter months and to which we can make increased sales during the warmer months, constitute a favorable market profile. In 2006, 2007, 2008, 2009 and 2010, our load factors were 98.7%, 100%, 96.8%, 95.8%, and 92.1% respectively.

As of December 2010, we had firm transportation contract volumes with the concession ring zone of 23.62 MMMC per day. The volume of firm transportation contracted to Bahia Blanca, which is used to recover the heat after the generation of subproducts, amounted to 0.41 MMMC per day. In addition, we have 0.55 MMMC of firm transportation contracts for Tierra del Fuego per day.

Since 2005, the production of gas has been insufficient to meet local demand as a result of the gas and electricity supply bottleneck that Argentina has faced since 2002.In order to prevent shortages, the Energy Secretariat and ENARGAS issued resolutions that allowed distributors gas that was originally destined for exports and electric generation to use for their clients. These resources were utilized by all distributors (except us), which triggered the increase in the costs of fuel-oil use and affected gas sales to Chile and Brazil. The strategy that we implemented, (of buying gas for the long-term, spot prices, and long-term for transportation), allowed us, through 2007, to avoid using emergency mechanisms while offering our industrial clients services without significant restrictions. At the end of May 2007, the Argentine energy system entered into a state of emergency as a result of low temperatures throughout Argentina, the decline in hydroelectric power, a reduced availability of fuel oil for combined cycle power plants, and insufficient injection of gas at wellheads. The state of emergency continued during 2008, 2009 and 2010. As a consequence of these shortages in 2007, we had to suspend service to CNG customers within our service area for a couple of days to meet our residential customers' demand.

Since 2006, we have had an aggregate firm transportation capacity for distribution and liquids processing of 24.6 MMCM (869 MMCF) per day. Our decision to secure significantly more firm transportation capacity was based in part on our experience during the winter months of 1993, when we struggled to meet non-interruptible residential demand; this legal obligation under our license, if not fulfilled, could result in significant penalties on us, including, in certain circumstances, revocation of our license. See Item 4: "-Regulatory Framework-The Gas Act and Our license-Penalties and Revocation." Since we have no gas storage facilities available, we strategically decided to increase our access to firm transportation capacity to meet expected growth in demand by increasing our firm transportation capacity with TGS and TGN.

Since August 2008, a propane injection air plant ("PIPA") has been connected to MetroGAS' network. It will allow for the injection of additional volumes of a natural gas equivalent up to 1.5 MMm3/day. If economically viable, it will serve as an alternative supply of natural gas should demand during the winter months require it. During 2009, PIPA was only used in test mode. During 2010, PIPA injected 32.7 MMm3 with a maximum of 1.12 MMm3 per day.

Slow Paying Accounts and Overdue Receivables

Past due receivables (owed mainly by residential customers and small volume general service commercial clients) totaled Ps. 67.6 million at December 31, 2010, Ps. 91.0 million at December 31, 2009, and Ps. 83.8 million at December 31, 2008. As of December 31, 2010, we had a reserve of Ps. 21.9 million against past due receivables.

Under our license, we may terminate gas services to delinquent customers provided such customers receive prior notice of termination. No minimum period between notice to delinquent customers and the termination of service is specified in our license or required by ENARGAS. We currently provide customers with at least ten working days' notice. Our management expects, based on industry experience and the lack of economic alternatives to gas for residential customers, that our practice will avoid increases in the number of unpaid accounts.

Mandatory Investments

Our license requires us to maintain our operating system in good order. Safety, design, maintenance and operations standards, required to be met by Argentine gas distribution systems, were governed by Gas del Estado's technical regulations, which were based primarily on the 1976 United States Code of Federal Regulations, Title 49, Sections 190-192 and modified for local conditions and with a variety of European standards. After the privatization of Gas del Estado, the Argentine Government required that Argentine gas distribution systems, including ours, be brought up to current (1991) United States Federal Standards No. 49. Pursuant to our license, we, like the other privatized natural gas transportation and distribution companies, were required during 1993 through 1997 to make certain initial capital investments, or the "Mandatory Investments," to meet these requirements during our first five years of operations. ENARGAS has ruled that we have complied with the Mandatory Investment program.

Distribution System

We acquired from Gas del Estado approximately 11,182 km of distribution mains and service pipes supplying approximately 2 million customers in our service area. We acquired pipelines operating in four pressure regimes: 286 km of high-pressure system operating at 22 times normal barometric pressure, or "Bar," 548 km of 10 Bar intermediate-pressure system, 6,101 km of 1.5 Bar medium-pressure system and 4,246 km of 0.022 Bar low-pressure system. The records and maps of the distribution system transferred by Gas del Estado generally have been found accurate. Upon our commencement of operations in December 1992, we conducted a survey of the assets received from Gas del Estado and began a survey of the distribution pipelines, as described below. We found the assets and the distribution system in relatively good condition and adequate for performance of its intended functions.

Our high-pressure system is made of welded steel construction, approximately 85% of which is under 50 years old. Approximately 48% of the medium-pressure system is constructed of welded steel and approximately 52% is constructed of polyethylene. Approximately 75% of the polyethylene medium-pressure system is less than 15 years old, and over 96% of the entire medium-pressure system is less than 35 years old. The low-pressure system is almost completely made of cast iron and is approximately 55 years old. Our current policy is to replace cast iron pipes with medium-pressure or low-pressure polyethylene pipe depending on which is the most cost-effective solution. Polyethylene pipe has various operational advantages, the most important being its lack of vulnerability to corrosion.

Since the Takeover Date, we have increased the length of our distribution system from 11,182 km to approximately 16,493 km. This increase is primarily a result of system expansion, with the majority of such expansion being undertaken with medium-pressure polyethylene pipes. In addition to the distribution mains, the distribution network includes 346 pressure reduction stations. There are no material capacity constraints within the distribution system that would affect the present customer base.

The gas injected into the system at the city gates is odorized by means of a proportional injection system, comprised principally of flow controllers and pumps. The system has back-up streams that come into operation in case of malfunctions in the main stream. Samples of gas are taken at around 60 points on the system to monitor odorant concentration and to verify equipment performance.

To ensure that the demands on the system are met according to standards, an on-line Supervisory Control and Data Acquisition system, or "SCADA," monitors pressure and flow at the city gates and at certain large customers. SCADA also monitors pressure at different regulator stations on the network, allowing us to monitor and regulate the flows on the system in order to guarantee supply of natural gas to all our customers.

Metering System

Our metering system consists of approximately 2.2 million meters. New metering systems with temperature and pressure correctors were introduced for large customers to enable remote monitoring and control of distribution, and to include the ability to monitor the interruption of supplies to users with interruptible supply contracts during the periods of peak winter demand.

Maintenance

On account of the current economic situation in Argentina, we will continue carrying out the minimum maintenance activities necessary to ensure a safe and reliable gas distribution system. Due to this situation, activities related to corrective maintenance have been increased.

We classify and prioritize gas leaks reported by the public according to the risk involved in each leak. During 2010, we handled all gas leaks reported by the public that were classified as high priority within the first two hours of them being reported. We handled 99% of those high priority leaks within an hour of their being reported.

Preventive maintenance activities seek to minimize the risk of supply failure and are responsible for the system's scheduled and unscheduled maintenance activities. In the recent years, we have not been able to mitigate the risk of supply failure due to restrictions on resources that impact these preventative maintenance activities.

During 2010, we engaged in a series of infrastructure projects to improve the reliability of our gas distribution network. A 22 bar high pressure pipeline, approximately 6km in length and 6" in diameter, was built in order to reinforce the San Vicente, Buenos Aires' supply.

We continue replacing older, mainly cast iron, mains. In addition, in 2010 we replaced small sections of a high pressure pipeline which were considered insecure. We continue with our maintenance program of pressure regulator stations, which allow us to reduce our operative risk while at the same time increase our network's reliability. Replacement priority is given on the basis of the level of the associated risk.

We have introduced a pressure management program consisting of placing profilers in most of the district governors that feed the low-pressure system. These profilers allow us to maintain even pressures in the system in spite of demand fluctuation, avoiding over-pressurization at night and ensuring proper supply during periods of peak demand. We have installed remote control equipment on 78 key district governors, which enable us to adjust pressure settings more rapidly.

In August 2007, there was an incident (related to a manufacturing defect) to a 24" steel main operating at 22 bar. This situation has modified the risk assessment of this main, which takes in account the likelihood of failure and the consequences of such failure. To reduce the risk of similar incidents occurring, evaluation tests were performed during 2008 that led to a reduction in the pressure of the steel main to 12 bar. Additionally, a structural reliability analysis ("SRA") was performed during 2009 that recommended a further reduction to a pressure below 6 bar. The steel main is now operating at 4 bar. As a result of the quantified risk assessment ("QRA") we performed in 2010, we concluded that the new pressure of the pipe is tolerable in the ALARP ("As Large As Reasonable Possible") zone. Despite the QRA results, however, the replacement of this pipeline is still necessary to restore the reliability of the 22 bar system. In 2010, taking into consideration the importance of this pipe as it connects MetroGAS' network with the distribution company next to MetroGAS' area, and in order to keep the pressure at 22 bar, we replaced a 2km long part of this pipe; however, due to lack of available resources, its complete replacement is not within our maintenance plan for 2011.

In August 2009, there was another incident (related to a failure in the circumferential weld of the pipe) on a 24" steel main operating at 22 bar. Although we are currently performing an evaluation of this pipe, both incidents have increased the operation risk in the 22 bar system. Consequently, we have decided to reduce the pressure in this system until we have completed the assessment of the sections of the pipelines more likely to fail.

Commercial Contracts

Natural Gas Purchase Contracts

Deregulation of the Price of Gas

The price of natural gas at wellhead was deregulated in accordance with the Gas Act by Executive Decree No. 2731/93 as of January 1, 1994. As a result, the price of gas under our new and renegotiated supply contracts increased, in dollars, from the previously regulated price of US$ 0.97 (Ps. 0.97) per MMBTU to a weighted average of US$ 0.59 (Ps. 1.83) per MMBTU at December 2005.

The cost of gas, before and after deregulation, is passed through to our customers, subject to ENARGAS' approval. ENARGAS may limit the portion of our gas costs that we pass through to our users to the extent it determines that the price we paid exceeds the price paid by other distributors in similar conditions and for equivalent volumes. See Item 4: "-Regulatory Framework-Tariffs-Semiannual Adjustments to Tariffs Contemplated by Our license." Our license provides that ENARGAS may review whether the price increases were incurred prudently. In August 1994, the Argentine Government enacted Decree No. 1,411/94, which empowers ENARGAS to limit the pass-through of the price of gas to prices that are no higher than the lowest price for similar quantities of gas purchased under similar conditions from the same field. This empowerment arises when ENARGAS finds that the contracts under which we purchased gas were not the product of a transparent, open, and competitive process.

The Gas Act and our license contemplate that tariffs will be adjusted semiannually to reflect changes in the cost of purchasing gas and purchasing transportation services. See Item 4: "-Regulatory Framework-Tariffs-Semiannual Adjustments to Tariffs Contemplated by Our license." Tariff adjustments based on price of gas changes occur in May and October. We must submit our gas purchase contracts to ENARGAS to support a request for a tariff adjustment that is based on estimated quantities to be purchased at contractual prices under each such contract during the upcoming tariff period. We have disagreed with ENARGAS on the adjustment of tariffs to reflect increases in the price of gas on a number of occasions; ENARGAS had partially denied or delayed tariff increases that we requested based upon price increases that we contracted with our gas suppliers for. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Us-We have been, and continue to be, dependent on the regulatory authority of ENARGAS, which may have an adverse effect on our financial condition and results of operations."

Current Gas Purchase Contracts

In late 2003, we reached agreements with our gas suppliers ("Revised Purchase Contracts"). As part of these agreements, we were relieved of any take-or-pay obligations we might have had under the natural gas contracts in effect in 2002 ("the Existing Contracts"). As a result of these negotiations our contracts with Total Austral S.A., Pan American Energy LLC, Sucursal Argentina, Wintershall S.R.L. (collectively, the "Total/Pan American Energy/Wintershall Contract") and our contract with YPF (the "YPF Contract") were amended. The Public Emergency Law and Decree No. 214/02, which converted all U.S. Dollar-denominated obligations existing as of January 6, 2002 into Peso-denominated obligations at a rate of exchange of one Peso per U.S. Dollar have affected all of our U.S. Dollar-denominated contracts governed by Argentine law, including our gas supply agreements that are essential to provide our licensed service. Subject to the continuing compliance of the National Government with the obligations it has assumed, under the provisions of the Agreement for the Implementation of the Schedule for the Normalization of Gas Prices ("2004 Agreement") and as a result of the renegotiations of contracts with most of our gas suppliers, gas producers whose contracts were renegotiated have committed themselves to suspending actions and procedures brought against the gas distributors for claims resulting from the above-mentioned law. As of August 1, 2007, this suspension is considered a permanent waiver in accordance with Resolution No. 599/07.

The Wintershall Energia S.A. contract, which expires on January 1, 2011, provided us with 1.20 MMCM (42 MMCF). The prices set forth in contract were renegotiated in accordance with the terms of the 2004 Agreement. Since August 2007, pursuant to Res. SE 599/07 , the contracted volume was modified up to an average daily of 0.32 MMCM.

As a consequence of gas unbundling in the Argentine gas market, during 2006 we decreased our daily aggregate amount of natural gas purchased under our long-term contracts. See "Item 4: Information on the Company - Business Overview - MetroENERGÍA" above.

All of our other contracts provided for in Resolution No. 208/04, expired on December 31, 2006. However, these agreements were extended until April 30, 2007 and subsequently until July 2007 as the natural gas suppliers were allotted more time to reply to the National Government's proposed agreement with them.

On June 14, 2007, Resolution No. 599/07 of the Energy Secretariat was published in the Official Gazette, approving the draft Agreement with Gas Producers 2007-2011 (the "Agreement 2007-2011"). It was subsequently ratified by the gas producers and came into effect on August 1, 2007. The Agreement 2007-2011 governs and regulates the supply of natural gas by gas producers to gas distribution companies (who in turn distribute gas to residential users, small businesses, industries, CNG refueling stations and power plants) for the years ended December 31, 2008 through 2011. The Agreement 2007-2011 sets forth regulations depending on the type of consumer and indicates the volumes, basins and point of entry to the transportation system to be observed by each gas producer. As a result of factors not attributable to us (e.g., lack of compliance of certain producers, lack of transportation capacity, increased demand for natural gas, etc.), the volumes made available to us under the Agreement 2007-2011 do not cover the demand for natural gas from our non-interruptible customers.

Due to our understanding that the volumes, basins and points of entry to transportation set forth in the Agreement 2007-2011 would prevent us from fullysupplying our non-interruptible demand, we have made reports to ENARGAS, the Energy Secretariat and the Fuel Subsecretariat to raise awareness of this situation and to request its remediation.

In September 2008, the Energy Secretariat reached an agreement with natural gas producers, and issued Resolution SE No. 1,070/08, which (i) increased the price of gas and consequently the margin of gas producers, especially the margin to come from gas distribution sales to residential customers and (ii) establishes new segment prices (some of which have been modified since November 2008 by means of Resolution SE No. 1,417/08).

On October 4, 2010 ENARGAS issued new dispatch rules named "Procedure for Gas Applications, Confirmations and Control" governinginter alianatural gas injection by producers and natural gas nominations by distributors. The aim of this supplemental regulation is to determine the minimum consumption levels of large users, in order to manage natural gas dispatch and curtailments during periods of shortages of natural gas. Among its rules, the Procedure establishes that natural gas distributors are free to determine the volumes of gas they require for their non-interruptible demand (comprising basically of residential and small commercial users) to be supplied by the producers, regardless of the estimated volumes committed by producers under the Agreement 2007-2011. Since October 1, 2010, when such Procedure entered into force, MetroGAS has nominated daily the total volume of natural gas needed to supply its uninterruptible demand.

In addition, distribution and transportation licensees are required to obtain some information from Large Users, other Direct Shippers and General P and General G clients with a daily consumption in excess of 5,000m3 of natural gas. The data to be provided by these users includes (i) a basic description of their production processes; (ii) the type and characteristics of transportation and distribution contracts; (iii) the maximum daily consumption levels during the winter season and average daily consumption (in cubic meters); (iv) a description of main equipment and auxiliary facilities; (b) regular consumption needs for each piece of equipment; (vi) consumption levels for minimum production needs; (vii) the minimum consumption needs in order to avoid damages in equipment or auxiliary facilities;(viii) descriptions of available alternative sources of fuel; (ix) any environmental concerns related to supply interruptions; and (x) the annual maintenance outage.

The following table sets forth the daily aggregate amount of natural gas we may purchase under our long-term contracts as of December 31, 2010, during the years and seasons indicated, and our seasonal daily take-or-pay obligations under such contracts:

Daily Contract Volumes and Take-or-Pay Obligations

	2010
	MMCM	MMCF
Daily Contract Volumes
Summer (Oct.-April)	0.19	6.56
Winter (May-Sept.) (a)	0.50	17.54
Daily Take-or-Pay Contract Volumes
Summer (Oct.- April)	0.17	6.00
Winter (May-Sept.) (a)	0.45	15.89

Take-or-Pay Obligations

Our gas purchase contracts generally allow us to recover any amounts paid as a result of incurring take-or-pay liabilities to gas suppliers within periods of three to twelve months by taking additional gas in amounts in excess of daily contract minimum volumes. We believe that it is unlikely that the take-or-pay provisions in our gas supply contracts will result in any significant liability for gas not taken. Since 1993, we incurred no take-or-pay liability under our gas purchase contracts that we were not able to recover by taking gas supply at a later time at no additional cost to us.

Our exposure to take-or-pay liability is affected by a number of factors that are not within our control. In late 2003, we reached agreement with our gas suppliers on the Revised Purchase Contracts. As part of such agreements, we were relieved of any take-or-pay obligations we might have had under the Existing Contracts. As a result of the 2004 Agreement, we renegotiated our gas supply contracts. See Item 4: "-Current Gas Purchase Contracts." Our take-or-pay commitments through 2010 under those gas purchase contracts required us to pay an average 90% of the cost of gas that we are entitled to purchase under such contracts. No payments have been made under these take-or-pay commitments.

Limitations on Short-Term Gas Purchase Contracts

Executive Decree No. 2,731/93 established a system whereby all gas purchases and sales made under contracts having duration of more than six months are deemed to be made in the long-term natural gas market. All other gas purchases and sales are deemed to be made in the short-term natural gas market. This decree requires that sellers and buyers of natural gas register in a special registry and establishes several reporting obligations regarding volumes, prices, shipping and delivery points, and the absence of clauses that restrict or distort competition. All information furnished pursuant to these requirements is to be treated by the Energy Secretariat as confidential. Pursuant to these regulations, distribution companies (including us) are allowed to purchase no more than 20% of their gas supplies in the short-term natural gas market. The ceiling on purchases in the short-term natural gas market may be waived by the Energy Secretariat in the event of force majeure and may be increased to 40% upon development of increased competitiveness in the short-term natural gas market.

From 1999 to 2005, we purchased gas in the spot market, taking advantage of Executive Decree No. 1,020/95, under which we share with our customers 50% of the profit or loss resulting from differences between our purchase prices of gas in the spot market and reference prices posted by ENARGAS. The volume we purchased in the spot market accounted for an average of 0.5% during the summer months and 7% during the winter months of our gas purchases for each summer and winter period of 2005 compared to an average of 1.5% during the summer months and 10.4% during the winter months of our gas purchases for each summer and winter period of 2004. During 2006, 2007, 2008, 2009 and 2010, we did not make any gas purchases in the spot market.

Gas Transportation Contracts

General

Two gas transportation companies, TGS and TGN, were created in connection with the privatization of Gas del Estado. They are regulated by ENARGAS and must provide transportation service to customers pursuant to the terms of their licenses, the Gas Act, and other regulations. See Item 4: "-History and Development of the Company-The Argentine Natural Gas Industry." Transportation companies are prohibited from buying gas for resale; we and the other distribution companies purchase gas directly from producers for resale to customers.

The TGS system consists of three main pipelines: the San Martin, Oeste-Neuba I and Oeste-Neuba II pipelines. The TGN system consists of two main transmission pipelines: the Norte line and the Centro-Oeste line. In addition, the TGN system is connected to the Bolivian gas transportation system. The TGS system includes the Buenos Aires ring connecting it to the TGN system. Our contracts with TGS (see Item 4: "-TGS Transportation Rights") provide for service over the San Martin, Oeste-Neuba I and Oeste-Neuba II pipelines. We also have contracts with TGN (see Item 4: "-TGN Transportation Rights") providing transportation of natural gas by use of an indirect connection via the Buenos Aires ring.

The transportation tariff for firm transportation consists of a capacity reservation charge and is expressed as a maximum monthly charge based on the cubic meters per day of reserved transportation capacity. Firm transportation capacity contracted by distribution companies must be paid for whether or not the capacity is actually used. The cost of any unused transportation capacity may not be passed onto customers. Accordingly, it is important that distribution companies achieve a balance between their firm transportation commitments and demand for gas in their service areas. In contrast, interruptible transportation services are provided on the basis that the transportation company will be used to transport gas when and if capacity is available in the system. Tariffs for interruptible transportation service are equivalent to the unit tariff of the reservation charge for the firm service using a load factor of 100%. For both firm and interruptible transportation services, we are obligated to provide the transportation company with a "natural gas in-kind allowance," which accounts for the gas consumed as compressor fuel or lost in transportation. From 1993 through 2010, approximately 7% of all gas purchased by us was provided to the transportation companies as in-kind allowances.

In the past, the expanded gas transportation capacity of the transportation companies in Argentina has generally been adequate to allow us to meet peak-day demands of all our non-interruptible customers. Nevertheless, we, like other distribution companies, normally will interrupt service to power plants and other industrial users at peak periods in order to meet core non-interruptible demand. We met all demand for non-interruptible service during the winter months from 1995 through 2006 and all priority demand for non-interruptible service during 2007, 2008, 2009 and 2010. See Item 4: "-Final Transportation Balance."

Decree No. 180 and the regulations issued thereunder to date establish an investment system for basic infrastructure works through the creation of a trust fund to deal with gas transportation and distribution investments proposed within the scope of activities carried out by the transportation and distribution companies. Additional regulations were imposed by the Ministry of Planning Resolution No. 185/04 (published in the Official Gazette on April 20, 2004), which created a global program for the issuance of debt securities and/or equity securities in financial trusts with a view to natural gas distribution and transportation expansion and/or extension works. Meetings were carried out to consider a project proposed by the Energy Secretariat and the possible impact of such proposal on the current transportation and distribution system. Each of TGS and TGN were involved in an open bidding process under the terms of Resolution No. 185/04 to expand their transportation capacity by approximately 5% of their current total transportation capacity. This bid to expand their transportation capacity was approved by ENARGAS on June 16, 2004. As a result of the bidding process, TGS awarded us a firm transportation capacity of 159,459 CM/day from the Tierra del Fuego basin to the Province of Santa Cruz, which is to be used to supply our firm customers. This award became available in the second half of 2005.

Overall Transportation Rights

As of December 31, 2010, we had contracted for aggregate firm transportation capacity of 24.6 MMCM (868 MMCF) per day, an increase of 37.9% from January 1, 1993. While we transport gas primarily with TGS, we began to transport gas with TGN in 1994. We increased our rights to firm transportation capacity, primarily by acquiring a significant portion of newly constructed transportation capacity from TGS and TGN and through supplementary arrangements with other holders of transportation capacity rights. In addition, we have entered into several exchange and displacement agreements with TGS that allow us to improve our utilization of existing transportation capacity. We also have acquired the right to use the firm transportation capacity of others on an interruptible basis, thereby facilitating an increase in overall annual sales and the ability to better meet the demands of non-interruptible customers during peak periods.

TGS Transportation Rights

As of December 31, 2010, we had available firm transportation capacity with TGS of 22.04 MMCM (779 MMCF) of gas per day through nine transportation agreements containing similar terms. Unless otherwise indicated, all of these contracts with TGS expire in May 2014. The largest transportation agreement provides us with aggregate firm transportation capacity for distribution of 17.02 MMCM (601 MMCF) of gas per day from the following producing areas: Province of Tierra del Fuego, 3.40 MMCM (120 MMCF); Province of Santa Cruz, 1.07 MMCM (38 MMCF); and the Province of Neuquen, 12.15 MMCM (429 MMCF). This contract includes 0.40 MMCM (14 MMCF) per day of firm capacity for the transportation of natural gas to the liquid gas separating complex owned by TGS near the city of Bahia Blanca in the Province of Buenos Aires. We are entitled under this contract to a 30% step-down right exercisable on May 1, 2004, but due to the increase in demand, we have not exercised this right. See Item 4: "-Business Overview-Revenues-Processed Natural Gas Service."

Our other contracts with TGS provide us with firm transportation capacity of 1.65 MMCM (58 MMCF) of gas per day from the Neuquen basin, 0.54 MMCM (19 MMCF) of gas per day from the Neuquen basin, 1.50 MMCM (53 MMCF) of gas per day from the Tierra del Fuego basin; 0.10 MMCM (3 MMCF) of gas per day from the Neuquen basin; 0.51 MMCM (18 MMCF) of gas per day from the Neuquen basin; 0.55 MMCM (19 MMCF) from Tierra del Fuego basin to the province of Santa Cruz; 0.01 MMCM (0.2 MMCF) from Neuquen basin to the city of Bahia Blanca in the province of Buenos Aires that expires in December 2009 but remains in effect pursuant to an automatic annual renewal clause; and 0.16 MMCM (6 MMCF) from Tierra del Fuego to the province of Buenos Aires that expires in June 2020.

In addition, we have six interruptible transportation contracts with TGS for a total of approximately 16.5 MMCM (583 MMCF) of gas per day. The first contract provides for interruptible transportation capacity of up to 6.5 MMCM (230 MMCF) of gas per day on the Neuba II pipeline. That contract expired on August 31, 1997, but it remains in effect pursuant to our exercise of an annual renewal clause. The second contract provides for interruptible transportation service for 3.0 MMCM (106 MMCF) of gas per day. This contract became effective in May 1997 and expires in May 2014. The third contract provides for interruptible transportation capacity of up 1.0 MMCM (35 MMCF) of gas per day. This contract became effective in June 1996 and expired in June 1997, but it remains effective pursuant to an automatic annual renewal clause. The fourth contract allows interruptible transportation service for 2.0 MMCM (70.6 MMCF) of gas per day. This contract became effective on June 1, 1999 and expired on June 1, 2000, but it remains in effect pursuant to an automatic annual renewal clause. The fifth contract provides for interruptible transportation service for 1.0 MMCM (35 MMCF) of gas per day. This contract became effective on May 2, 2000 and expired on May 2, 2001, but it remains effective pursuant to an automatic annual renewal clause. The sixth contract provides for interruptible transportation service of up to 3.0 MMCM (105.94 MMCF) of gas per day. This contract became effective on April 25, 2005, but it remains effective pursuant to an automatic annual renewal clause.

TGN Transportation Rights

As of December 31, 2010, we had available firm transportation capacity with TGN of 2.54 MMCM (90 MMCF) of gas per day.

On September 9, 1993, we entered into a contract with TGN, or the "TGN Contract" for 1.50 MMCM (53 MMCF) per day of firm transportation capacity to be constructed by TGN. The TGN Contract became effective on June 1, 1994. The TGN Contract expired on May 31, 2006 but remains in effect pursuant to automatic annual renewal clauses. On June 1, 2007, we recovered 1.03 MMCM (36.37 MMCF) per day of firm transportation capacity pursuant to this contract, which had been transferred in June 1997 by several agreements with certain industrial companies.

On June 1, 1996, we contracted with TGN for 0.50 MMCM (18 MMCF) per day of firm transportation. The arrangement with TGN provides for two contracts, one being for 0.40 MMCM (14 MMCF) per day of firm transportation capacity for distribution and the other for 0.10 MMCM (4 MMCF). Both contracts expired in May 2006, but remain in effect pursuant to automatic annual renewal clauses

During 2001, we entered into an agreement for 0.54 MMCM (19 MMCF) per day of our firm transportation capacity with TGN. The contract became effective in May 2001 and expires in May 2016.

In addition, we have five interruptible transportation contracts with TGN for a total of approximately 10.65 MMCM (376 MMCF) of gas per day. The first contract provides for interruptible transportation capacity of up to 0.45 MMCM (16 MMCF) of gas per day. That contract expired on July 29, 2008, but it remains in effect pursuant to an annual renewal clause. The second contract provides for interruptible transportation service for 5.0 MMCM (177 MMCF) of gas per day. This contract became effective on July 1, 2003 and expired on July 1st 2004, but it remains in effect pursuant to an annual renewal clause. The third contract provides for interruptible transportation service of up to 4.0 MMCM (141 MMCF) of gas per day. This contract became effective in March 26, 2007 and expired on April 2008, but it remains effective pursuant to an automatic annual renewal clause. The fourth and fifth contracts provide for interruptible transportation service of up to 0.6 MMCM (21 MMCF) of gas per day, respectively. These contracts became effective on December 28, 2007 and expired on April 30, 2009, but they remain in effect pursuant to automatic annual renewal clauses.

Other Transportation Rights

We entered into an agreement with a gas distribution company for interruptible capacity from the Neuquen basin for a period of seven years beginning November 1, 1994. This agreement assures us of a minimum of 2.5 MMCM (88.3 MMCF) of gas per day. The agreement was renewed on May 2001 for a period of fifteen years and at 3.0 MMCM (106 MMCF) of gas per day. Pursuant to this contract, we have agreed to certain "ship-or-pay" obligations at a reduced rate. In January 2009, the agreement was further modified, assuring us a minimum of 1.5 MMCM (53 MMCF) of gas per day.

Final Transportation Balance

In order to face an estimated peak demand for non-interruptible service of approximately 23.6 MMCM (833 MMCF) per day, since 2006 we have contracted for an aggregate firm transportation capacity of 24.6 MMCM (869 MMCF) of gas per day, which was generally adequate to satisfy demand during winter periods. Except for 2007 winter months, peak-day deliveries did not exceed firm transportation capacity. Our load factors were 92.1%, 95.8% and 96.8% for 2010, 2009 and 2008, respectively.

Agreements with BG Group

We had a number of agreements with BG International Limited, a subsidiary of BG Group, with respect to BG Group's role as our Technical Operator.

Technical Assistance Agreement

BG Group provided technical assistance to us as Technical Operator under the terms of an eight-year technical assistance agreement called the "Technical Assistance Agreement," which originally was dated December 28, 1992 and was renewable with the consent of both parties. The Technical Assistance Agreement required BG Group to provide services, including advising us on: (i) replacement, repairs, and renovation of facilities and equipment to ensure that the performance of the system accords with standards of prudent companies with good reputations; (ii) preparation of performance evaluations, operating cost analyses, and construction assessments, along with advice related to budget control; (iii) safety, reliability, and efficiency of system operation and gas industry services; (iv) compliance with applicable laws and regulations relating to health and safety, pollution, and the environmental protection of the system; (v) routine and preventive maintenance of the system; (vi) staff training; (vii) design and implementation of the procedures necessary to accomplish the aforementioned services; and (viii) the design and implementation of a management information and inspection system for all major aspects of natural gas distribution.

The original Technical Assistance Agreement provided for the payment to BG Group of an annual technical assistance fee net of any Argentine value added tax or local gross turnover tax equal to the greater of (i) US$ 3.0 million and (ii) 7% of the amount obtained after subtracting US$ 3.0 million from pre-tax net income before interest expense, financial income (expenses), and holding gains (losses), and income taxes. The parties renewed the Technical Assistance Agreement on December 28, 2000. While the terms and conditions of the original Technical Assistance Agreement generally were maintained, they were amended so that (a) the annual fixed fee would be payable in advance and in 12 installments instead of in three installments, (b) the parties could terminate the Technical Assistance Agreement subject to 180 days notice, and (c) the Technical Assistance Agreement would expire on December 28, 2008. On January 4, 2001, ENARGAS informed the parties it did not have any objections to the renewal.

The Technical Assistance Agreement also provided for BG Group to make its employees available to us for either long-term employment, in accordance with the Manpower Supply Agreement discussed below, or for the purpose of providing advice or implementing such advice. Advice was provided at no cost if we reimburse of direct expenses incurred by BG Group, including travel and living expenses incurred by BG Group employees providing such advice. The fees and other disbursements of BG Group under the Technical Assistance Agreement and the Manpower Supply Agreement were to be paid out of our revenues prior to the declaration and payment of dividends.

The shareholders of Gas Argentino provided resources and personnel that can assist the Technical Operator in performing its duties under the Technical Assistance Agreement. BG Group agreed to compensate YPF for any such collaboration out of the funds received by it under the Technical Assistance Agreement. We have benefited from BG Group's experience as an operator in the natural gas industry.

Pursuant to the Public Emergency Law and Decree No. 214/02, our Dollar-denominated payment obligations under the Technical Assistance Agreement were converted to Pesos at the rate of Ps. 1.00 per U.S. Dollar, plus a CER adjustment. Consequently, and due to our financial situation, the parties entered into an amendment, or the "Amendment," to the Technical Assistance Agreement, which became effective on March 1, 2002. The Amendment requires us to pay an annual fee equal to the greater of (a) Ps. 0.36 million, adjusted by CER, or the "Fixed Management Fee," and (b) 7% of our net profits, or the "Profit Fee," if a financial debt restructuring is achieved. The Amendment also established the following: from the fiscal year in which the Profit Fee is higher than Ps. 3 million adjusted by CER as of March 31, 2002 and provided we achieve a financial debt restructuring, the Amendment loses further effect. In addition, we shall make annual payments of an amount equal to the Fixed Management Fee of Ps. 3 million adjusted by CER as of March 1, 2002, less any payments made pursuant to the Amendment. This deferred fee is payable in equal monthly payments over thirty-six months.

On December 28, 2008 the Technical Assistance Agreement between BG Group and us expired. BG Group considers that, during the years the agreement was in force, we acquired the necessary technical knowledge to assure the reliability, safety and efficiency of our gas distribution services. Consequently, the contract has not been renewed and BG Group is no longer our Technical Operator. This decision was approved by our Board of Directors on March 6, 2009.

Personnel Supply Agreement

A Personnel Supply Agreement was entered into in July 24, 2002 between BG Argentina S.A. with an automatic renewal at the end of each term. Pursuant to this agreement, BG Argentina is required to provide highly trained personnel for management and operational positions on a monthly fee basis to be calculated pursuant to the costs that BG Argentina incurs while providing these services.

Bypass Rights and Competition

As discussed under Item 3: "Key Information-Risk Factors-Our revenues may be adversely affected by the right of our clients to bypass our transportation services," large users of natural gas within our service area are permitted to contract directly with other parties for the sale of natural gas (provided they provide us and ENARGAS with three months notice) as well as supply of natural gas. However, if such users utilize our distribution system, they must pay us a tariff. These users may also build their own transmission systems and thereby completely bypass our services, in which case we would not be entitled to any fees. Users wishing to completely bypass our system face significant impediments to doing so, including significant expenses in building and maintaining connection lines and limited access to firm transportation capacity.

We have built strong working relationships with many of our major customers and we are implementing appropriate contracting and pricing policies that discourage the construction of direct connecting pipelines between our major users and the transportation systems that would completely bypass our system and avoid the use of our firm transportation capacity. However, some of our users may still completely bypass our services or require us to further unbundle our services in a manner that could adversely affect our margins. See Item 4: "-Regulatory Framework." Our management believes that the effect of any such situations could, however, be partially mitigated by provisions in certain of our firm transportation contracts with TGS which provide that, if any of our users enters into a firm transportation agreement with TGS (either directly with TGS or with a third party such as a producer or gas broker), we would have the right to reduce our firm transportation commitment with TGS by up to the amount of the lost service between us and such customer. Our firm transportation contracts with TGN contain similar provisions.

On June 1, 2000, ENARGAS issued Resolution No. 1,748/00, which introduced amendments to the Service Regulation for "Small" and "Large" General Service Users. The Resolution permits users of 5,000 CM (176.6 MCF) per day of gas instead of 10,000 CM (353.1 MCF) of gas per day to contract for transportation capacity on a firm commitment basis; it also allows users of 1.5 MMCM/year (52.9 MMCF) per year of gas instead of 3.0 MMCM (105.9 MMCF) of gas per year to contract for transportation capacity on an interruptible basis. Additionally, the period to notify ENARGAS and the distribution companies of any proposed bypass was reduced from six to three months. On December 15, 2000, we objected to these changes by filing for an administrative proceeding. This matter has not yet been resolved.

Alternative energy sources, primarily fuel oil for power plants and LPG for residential users and smaller commercial users, are currently substitutes for natural gas. For many years now, the abundance of natural gas in Argentina has historically provided natural gas with a large cost advantage over fuel oil. In order to enable us to achieve a higher load factor during the warmer months when residential demand is weaker, certain power plant users have agreed to take a minimum amount of gas transportation at discounts from maximum tariffs. Conversely, during the colder months, we and certain dual-fuel power plants in our service area agreed that we would deliver to such power plants a minimum volume of gas transportation on an interruptiblebasis. If we fail to meet our commitments, we will be required to refund a portion of the excess cost of fuel oil over the price of undelivered gas on an energy-equivalent basis.

In the past, CAMMESA has lobbied aggressively to secure gas and transportation capacity for power plants. CAMMESA also recently obtained its own gas transportation capacity from the expansion of the gas transportation system. This new position of CAMMESA in the gas market and its lobbying effort, may pose a risk for our services. We may be bypassed or otherwise materially and adversely affected. See Item 3: "Key Information-Risk Factors Relating to Us-Our revenues may be adversely affected by the right of our clients to bypass our services."

Environmental and Safety Matters

Our current operations are in substantial compliance with applicable laws and regulations relating to health and safety, and to environmental protection. Foreseeing additional local health, safety and environmental, or "HSE," legal requirements, we have adopted BG Group's HSE strategies. We are committed to complying with BG Group's HSE performance standards (international best practice). We also are engaging issues related to the reduction of greenhouse gas emissions to minimize our impact on climate change.

To ensure continuous improvement and compliance with legal, regulatory, and corporate requirements, ISO 14001 (Environmental Management) and OHSAS 18001 (Occupational Health and Safety Assessment Series) standards were successfully audited in December 2010 and maintained HSE Management System's certification.

Furthermore, MetroGAS has received an award from ALASEHT (Asociación Latinoamericana de Seguridad e Higienen en el Trabajo) in recognition for "having continuously developed recognized important actions for the preservation of Health and Life of its Members as well as Environmental Protection."

Insurance

As of December 31, 2010, we maintained insurance coverage for third-party loss and casualty for up to US$ 50 million. Our physical assets were insured for up to US$ 79.2 million. We believe that our insurance coverage corresponds with standards for the international gas distribution industry. We do not carry business interruption insurance. There is no assurance that insurance coverage will be available or adequate for any particular risk or loss.

Regulatory Framework

Below is a description of the regulatory framework applicable to gas transportation and distribution companies, including ours. However, and as noted below and elsewhere in our annual report, the Public Emergency Law has altered this framework significantly and to our detriment. These changes also create uncertainty as to our future business.

We have taken all necessary steps to reserve our legal rights under our license and the applicable regulatory framework.

The Argentine Constitution

In 1994, the Argentine Constitution was amended with respect to public utilities. The amendments include grants of certain rights to users of public utility services, antidiscrimination provisions, and provisions requiring regulation of legal and natural monopolies and for user representation on public utility regulatory agencies, including ENARGAS. Although the effect of these amendments on the Argentine natural gas regulatory regime cannot be ascertained at present, the present regulatory framework generally is consistent with the Argentine Constitution, as amended.

The Gas Act and Our License

Along with other regulatory decrees, the Pliego, the respective transfer agreements, and the licenses of each of the privatized gas companies, the Gas Act, together with Decree No. 1,738/92, as amended, or the "Executive Decree," establish the legal framework for the transportation, distribution, storage, and marketing of gas in Argentina under a competitive and partially deregulated system. The Gas Act and the respective licenses establish ENARGAS as the regulatory entity charged with administering and enforcing the Gas Act and the Executive Decree and related regulations, subject to judicial review.

Gas transportation and distribution companies operate in an open-access, nondiscriminatory system under which producers and users, as well as distributors, are entitled to equal and open access to the transportation pipelines and the distribution system in accordance with the Gas Act, applicable regulations, and the licenses of the privatized companies. The Gas Act provides that a distributor must not unduly discriminate among customers or grant any customer an undue preference. The distributor must offer open access to any available capacity on the distribution system to all parties on an equal footing.

The Gas Act prohibits transportation companies from buying or selling natural gas. In addition:

gas producers, distributors, and users which contract directly with gas producers may not own a controlling interest (as defined in the Gas Act and regulatory decrees) in a transportation company;

gas producers and transporters may not own a controlling interest in a distribution company;

customers which purchase gas directly from producers may not own a controlling interest in a distribution company in their geographic area; and

contracts between affiliated companies engaged in the different phases of the natural gas industry must be approved by ENARGAS. ENARGAS may disapprove such contracts if it determines that they were not entered into via an arm's-length transaction.

Term of Our License

Our license, which had an original 35 year team, authorizes us to provide the public service of gas distribution. The Gas Act provides that we may apply to ENARGAS for a renewal of our license for an additional ten-year term upon expiration of the original 35-year term. At that time, ENARGAS is required to evaluate our performance and make a recommendation to the Argentine Government. We will be entitled to a ten-year extension unless ENARGAS proves that we are not in substantial compliance with all of our obligations arising under the Gas Act, the Pliego, related regulations and decrees, and our license. At the end of the 35-year or 45-year term, as the case may be, the Gas Act requires that a new competitive tender process be held in order to grant a new license. We will have the option, if we have complied with our obligations, to match the best bid offered to the Argentine Government by any third party. ENARGAS has not issued regulations regarding the procedures to be followed in awarding a new license upon a competitive tender or with respect to our compensation upon the expiration of our license term. See Item 4: "-The Gas Act and Our License-Expiration."

Subject to two exceptions, our license cannot be amended without our consent. First, ENARGAS may alter the terms of the service specified in our license, provided that an appropriate adjustment is made to the tariffs that we can charge for our services. These tariffs offset the financial impact of any alternation to the license. Second, ENARGAS may modify the tariffs initially established when the license was issued in accordance with the tariff-setting provisions of the Gas Act. See Item 4: "-Tariffs."

Access

The Gas Act provides that only licensed private companies may engage in the distribution of gas. A license confers the exclusive right to distribute gas within a specified geographic area; notably, any pre-existing sub-distributors or those approved by ENARGAS may also distribute gas. The exclusive right to distribute gas in a geographic area does not encompass the exclusive right to sell gas within that area. Under certain circumstances, users may purchase gas directly from producers or marketers. However, if the gas purchased from others is delivered using our distribution system, the same distribution margin is applicable whether we deliver our own gas to a consumer or the gas is purchased by the consumer from a third party.

A consumer wishing to be supplied with gas from a third party must give ENARGAS and us a minimum of three months notice of its intention to do so. ENARGAS may, depending on market conditions, reduce the minimum length of such notice period. Given current market conditions, the notice period has been reduced to three months. If a consumer purchases gas directly from others and subsequently wishes to purchase gas from us, we are not obligated to reinstate this supply service. If, however, the customer protests our refusal to reinstate service, the matter will be resolved by ENARGAS. See Item 4: "-Bypass Rights and Competition."

Our Obligations

We have various obligations under the Gas Act, including the obligation to comply with all reasonable requests for service within our service area. A request for service is not considered reasonable if it would be uneconomical for a distribution company to undertake the requested extension of service. We also have the obligation to operate and maintain our facilities in a safe manner; this obligation may require certain investments for the replacement or improvement of facilities as set forth in our license.

Our license details further our obligations. They include the obligation to (a) provide distribution service, (b) maintain continuous service, (c) operate in a prudent manner, (d) maintain the distribution network, (e) carry out mandatory investments, (f) keep certain records, and (g) provide periodic reports to ENARGAS. Our license also prohibits us without the prior approval of ENARGAS from assuming debts of Gas Argentino, from granting a security interest in our assets in favor of creditors of Gas Argentino, and from reducing our capital or distributing our assets, except by way of dividends in accordance with Argentine law.

Expansion

Major expansions of gas distribution facilities require prior approval of ENARGAS. The Gas Act provides that the distributor will be granted all rights necessary to affect approved expansions and carry out the licensed service. If a customer requests an expansion of the distribution facilities, but the distributor deems it uneconomical, a contribution towards the cost of the expansion may be required from the customer. Disputes regarding the economic feasibility of expansions are resolved by ENARGAS. An initial resolution regulating expansions was issued by ENARGAS on July 22, 1993, and a new resolution was issued on October 9,2009. These resolutions regulate the cases in which expansions require approval from ENARGAS either because of their magnitude or because contributions are required by the distributor from users or third parties. These resolutions require that the distributor prove the accuracy of its assertions when the distributor maintains that the expansion is economically infeasible and consequentially requires contributions from users or third parties. Subject to ENARGAS' approval, consumers may then contribute to construction of facilities deemed by the distributor to be economically infeasible.

Easements

Our license authorizes us to occupy public property without charge for the purpose of rendering the licensed service; if a charge is levied by a provincial or municipal authority, we may add a surcharge to the relevant tariffs to recover our added costs. Our license also grants us the right to obtain easements over private property required to carry out the licensed service, subject to a payment of compensation to the landowners. The Argentine Government originally had the responsibility of transferring title of the existing easements to us in our service area. When ENARGAS failed to complete the transfer of existing easements, the Licensees were handed the task of completing the transfers and negotiating with the landowners. This task is currently taking place under the supervision of ENARGAS.

Penalties and Revocation

Our license established a system of penalties in the event of a breach by us of our obligations thereunder, including warnings, fines, and revocation of our license. See Item 4: "The Gas Act and Our License-Expiration." These penalties may be assessed by ENARGAS based on, among other considerations, the breach's magnitude or its effect on the public interest. Fines of up to US$ 500,000 may be levied for multiple breaches of the License terms.

Our license may only be revoked by the Argentine Government and then only upon ENARGAS' recommendation. Our license specifies several grounds for revocation, including the failure to provide (a) 35% or more of our service for 15 consecutive days or 30 nonconsecutive days during a year or (b) 10% or more of our service for 30 consecutive days or 60 nonconsecutive days during a year; in other case, the failure must be due to reasons attributable to us. The Argentine Government also may terminate our license if (a) the restrictions established by the Pliego and the Transfer Agreement in connection with the transfer of stock in us or Gas Argentino are breached (See Item 7: "Major Shareholders and Related Party Transactions"), (b) the restrictions established by the Gas Act and the Pliego on cross-ownership between production, transmission, and distribution of gas are breached, or (c) if we (i) attempt a transfer of our license, or (ii) to transfer or encumber any assets offered by Gas del Estado and designated as essential assets, or the "Essential Assets," or (iii) use the Essential Assets for purposes other than those established in our license without ENARGAS' approval. Additional events, which will result in the cancellation of our license, include a gross failure by us to make mandatory investments or to meet our other obligations under our license, our bankruptcy, a liquidation or our winding up; however, except in the case of bankruptcy, liquidation or winding up, our license requires that we receive notice and an opportunity to cure before termination. The Argentine Government has issued Decree No. 1,834/02, which provides that, during the state of economic emergency declared by Law No. 25,561, neither the filing of a reorganization proceeding by us nor the filing of a bankruptcy petition against us will cause the termination of our license. The economic emergency was extended in several opportunities but, pursuant to Law No. 26,563, the state of economic emergency expires on December 31, 2011. We cannot guarantee that the suspension of this provision of our license will remain in effect after that date.

If our license is terminated by the Argentine Government prior to the expiration of its full term as a result of our nonperformance, the Argentine Government may offset our net book value against any damages due to the Argentine Government caused by the events resulting in the termination of our license. These damages cannot be less than 20% of our net book value. In addition, the Argentine Government under such circumstances can require Gas Argentino to transfer its shares in us to ENARGAS, which will act as a trustee until those shares are sold pursuant to a competitive tender.

Upon termination of our license, the Argentine Government may appoint an interim operator to provide the licensed services until a new licensee is appointed. The fees and expenses incurred by an interim operator shall be borne by us. Subject to judicial review, we will not be entitled to any payment for loss of profit or in consideration for the interim operator's use of our property.

Upon revocation of our license, we must transfer to the Argentine Government (or to a party designated by the Argentine Government) all Essential Assets free and clear of any liens and encumbrances, unless the Argentine Government requires Gas Argentino to transfer its shares in us for a subsequent competitive tender.

Expiration

As a general rule, upon the expiration of our license at the end of its full term, we will be entitled to the lower of the following two amounts: (a) the net book value of our Essential Assets (including property, plant, and equipment) determined on the basis of the price paid by Gas Argentino and the original cost of subsequent investments carried in U.S. Dollars and adjusted by the U.S. PPI, net of accumulated depreciation; and (b) the proceeds of a new competitive bidding process to acquire our license, net of costs and taxes paid by the successful bidder. See Item 4: "-The Gas Act and Our License-Term of Our License." At the end of our license term, if we have performed adequately during the term of our license (including any extension, if applicable), we may participate in a new bidding process. If that is the case, we would have the right to match the best offer made (by paying the excess of the best offer above the appraised value of the Essential Assets) or, if we decline to match the best offer, to receive the appraised value of the Essential Assets; in both cases, the amounts would be calculated in accordance with our license.

All of our debts must be repaid upon expiration of our license unless (a) we are awarded a new license by exercising the right to match the best offer in a new bid or (b) the Argentine Government terminates our license and in turn, ENARGAS instructs Gas Argentino to transfer all its shares in us to ENARGAS as trustee for their subsequent competitive tender.

Our license also may terminate before the expiration of its term if we give notice that we are waiving our license due to serious and repeated defaults by the Argentine Government. In that case, we will be entitled to payment by the Argentine Government of the lower of the following two amounts: (a) the net book value of our Essential Assets (including property, plant, and equipment) determined on the basis of the price paid by Gas Argentino, and the original cost of subsequent investments carried in U.S. Dollars and adjusted by the U.S. PPI, net of the accumulated depreciation; and (b) the proceeds of a new competitive bidding process to acquire our license, net of costs and taxes paid by the successful bidder.

ENARGAS

The Gas Act established ENARGAS as the body to administer and enforce the Gas Act and applicable regulations. ENARGAS' jurisdiction extends to the transportation, marketing, storage, and distribution of gas. Its mandate, as stated in the Gas Act, includes the protection of users, the fostering of competition in the supply and demand for gas, and the encouragement of long-term investment in the gas industry.

Duties and Structure

The Gas Act provides that ENARGAS will be managed by a board of five full-time members, who are appointed by the Argentine Government with the consent of a Congressional committee. Board members serve staggered terms. The terms of the initial board members ran from one to five years. The terms of subsequent board members are five years, and board members may be reappointed. The board members may, with the consent of a Congressional committee, be removed by the Argentine Government, which must expressly state the reasons for such a decision.

ENARGAS' duties include, among other things:

enforcing the provisions of the Gas Act, applicable regulations, and the licenses of the privatized companies;

advising the Argentine Government on the granting, renewal, and revocation of licenses;

issuing orders, regulations or publications of its findings related to specific matters brought before it;

issuing and monitoring compliance with regulations covering safety, technical standards, uniform accounting, metering and billing, and disconnection procedures;

preventing any anticompetitive or discriminatory behavior by entities subject to the Gas Act;

approving tariffs and their adjustments;

issuing guidelines to be observed by the licensee companies in connection with open access to the gas distribution system and ensuring a fair and equal distribution of the available transmission capacity, taking into account the priority for non-interruptible service;

granting approval for the transfer of controlling interests in the distribution and transportation companies;

approving construction of new significant facilities, and the expansion or abandonment of existing ones;

inspecting and testing facilities and ordering the suspension of service and the repair or replacement of facilities and equipment;

issuing regulations regarding the maintenance of facilities and reporting requirements relating thereto;

providing for the protection of the environment and public service;

requiring regulated entities to supply information and documentation in order to verify compliance with the relevant regulations and inspecting transporters;

applying the penalties, including warnings and fines, provided for in the Gas Act and the licenses; and

appearing before civil and criminal courts to enforce compliance with the Gas Act and regulations thereunder.

ENARGAS is funded by fines and seizures collected in enforcing the regulations, and by the annual control and inspection fees paid by, among others, distribution and transportation companies, traders, and providers of storage facilities. The fee for each company is determined annually by ENARGAS on the basis of the gross income of the regulated industry and our proportionate share of that gross income.

Actions of ENARGAS under the Gas Act are subject to judicial review. Conflicts between two regulated entities or between a regulated entity and a third party arising from the distribution, storage, transportation or marketing of natural gas must be first submitted to ENARGAS. ENARGAS' decision may be appealed through administrative proceedings to the Energy Secretariat or directly to the federal courts of Argentina.

Restrictions with Respect to Essential Assets

A substantial portion of the assets transferred by Gas del Estado have been defined in our license as Essential Assets for the performance of the licensed service. Pursuant to our license, we are required to segregate and maintain the Essential Assets, together with any future improvements, in accordance with certain standards defined in our license.

Without ENARGAS' prior authorization, we may not dispose of, encumber, lease, sublease or lend Essential Assets for any reason or purpose other than to provide a licensed service. Any expansion or improvement made to the distribution system may be encumbered only to secure financing with maturities in excess of one year, to be used for the financing of that expansion or improvement.

The Transfer Agreement prohibits us from bringing any claims against the Argentine Government for damages arising out of or related to the Essential Assets on or after the Takeover Date.

On May 19, 2010, ENARGAS Issued Resolution No. 1,215, which expanded the definition of Essential Assets for transportation and distribution of natural gas services to include all computer databases related to the provision of the public services, including those related to measuring, invoicing and payment of such services. The revised definition of Essential Assets reads as follows: all tangible and non-tangible assets acquired by transportation and distribution licensees as from December 28, 1992, along with all the equipment and information contained in IT databases that are essential for the correct and timely provision of the licensed services, and for the adequate commercial management of clients and users. Subsequently, on July 12, 2010, ENARGAS issued Resolution No. 1,217, which clarified the definition of Essential Assets in relation to IT databases by limiting them to "all information contained in IT databases that are valid and essential for the correct and timely provision of the licensed services and for the adequate commercial management of clients and users and all material equipment that allows the creation, management, protection and distribution of such information to ENARGAS."

Tariffs

The regulatory framework establishes various classes of service with its corresponding tariffs. The Gas Act and our license establish the mechanism for setting the tariffs for each service class. The Gas Act provides that the tariff for natural gas, which we may charge to end users, includes the following: (i) the price of gas purchased; (ii) the transportation tariff for transferring gas from the production area to the distribution system; and (iii) the distribution tariff established by ENARGAS.

A distribution company may offer discounts, which reflect a reduction in its rate of return, provided that these discounts are not offered in an unduly discriminatory manner and that they are not below the distribution company's cost. Revenues lost due to discounting may not be recovered from other customers. See Item 4: "-Bypass Rights and Competition."

Current Tariffs

On January 1, 2002, all public services tariffs, including our tariffs, were pesified and frozen in accordance with the Public Emergency Law. Therefore, tariffs are no longer expressed in U.S. Dollars. Rather, they have been converted to Pesos at the rate of Ps. 1.00 per US$ 1.00. Adjustments of tariffs, in order to reflect changes in price indexes of foreign countries, are no longer made. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Us-Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors have issued an opinion that contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern."

We currently have two different tariffs, one for the city of Buenos Aires and the other for the Province of Buenos Aires, because, as of July 1998, gas tariffs are issued by ENARGAS, net of the turnover tax that is imposed by the provinces. The turnover tax, which was a set rate included in the original tariff as of January 1, 1993 and was payable by the gas distribution companies. Subsequent to January 1, 1993, different provincial jurisdictions varied the turnover tax rate and in some cases, the basis on which it was payable. In accordance with the Gas Act, which provides for the pass-through to customers of any changes in taxes, ENARGAS authorized the billing of turnover taxes to customers as a separate line item in their invoices. The net incomes of gas distribution companies are not affected by the above-mentioned modification.

On December 3, 2002, the Executive Power issued Decree No. 2,437, increasing the temporary tariffs, issued by ENARGAS in May 2002 pursuant to Resolution No. 2,611, "until the conclusion of the renegotiation process" for the Electricity and Gas sectors. Additionally, this tariff schedule introduced the "social tariff," which excluded the low-income residential customer from the initial adjustment. Shortly thereafter, the court suspended this Decree in response to the precautionary measure filed by the Ombudsman of the city of Buenos Aires and other advocacy organizations.

In addition, the Executive Power, by Decree No. 146/03 (published in the official Gazette on January 30, 2003), mandated a new temporary tariff increase for Electricity and Gas services effective from January 30, 2003. These increases and the "social tariff," which applies to certain sectors, were the same as those established by Decree No. 2437/02 and did not implement additional increases.

On January 30, 2003, ENARGAS issued Resolutions Nos. 2,787 and 2,788, providing for new tariffs applicable to Distribution and Transportation services in accordance with the adjustment established by Decrees Nos. 120/03 and 146/03. These tariff schedules were identical to those established in December 2002 by Resolutions 2,763 and 2,764, which were based on Decree No. 2,437. On February 27, 2003, ENARGAS issued a precautionary measure in court order "Customers and Users Union and Others vs. Ministry of Economy," which suspended the effects and application of Decree No. 146/03 and Resolutions No. 2,787 and 2,788.

On April 29, 2004, the Energy Secretariat issued Resolution No. 415/04, pursuant to which residential and commercial users receive certain discounts or are surcharged in accordance with their consumption of natural gas. In 2004, users who consumed less than 90% of the amount of gas they used during the same invoiced period of 2003 have received a discount equal to 10% to 12% on the cost of their annual natural gas consumption, while users who used above 95% of the gas they consumed during the same invoiced period of 2003 have paid a surcharge on the gas they consume over the 95% level.

On May 11, 2004, ENARGAS by means of Resolution No. 3,014/04 approved, on a temporary basis, the tariff framework expressed in Pesos applicable to the period extending from May 1, 2004 to September 30, 2004. On October 28, 2004, ENARGAS by means of Resolution No. 3,092/04 approved, on a temporary basis, the Tariff Framework, expressed in Pesos, applicable to the period extending from October 1, 2004 to April 30, 2005.

On April 11, 2005, the Energy Secretariat issued Resolution No. 624/05, which extended Resolution No. 415/04. Pursuant to Resolution No. 624/05 residential, commercial, and small industrial users receive certain discounts or are surcharged in accordance with their consumption of natural gas. In 2005, users consuming less than 90% or 95%, depending on the type of user and the amount of gas they consumed during an equivalent period of 2004, adjusted for the average temperature during each period, will receive a discount equal to one cubic meter per each cubic meter saved below those levels. Users whose consumption was above 90% or 105%, depending on the type of user, will pay a surcharge on the gas they consumed over those levels. The program will be effective from April 15 until September 30 each year, and this period could be modified by the Energy Secretariat as the program evolves.

On May 1, 2005, ENARGAS established a new tariff schedule, which continued with the same prices established for residential users, SGP 1, and SGP 2; for SGP 3, larger users, and CNG, a third increase was set for the prices of gas at wellhead. As per the daily differences, the high rebate established for R, P1, and P2 remained; the gain increased for the rest of the clients.

The new schedule also included two different gas tariffs, distinguishing between residential and business customers. The producers' initial invoices were based on estimates. After the gas was supplied, those invoices were adjusted for actual deliveries and the prices to be paid. This normalization scheme for residential customers was suspended for future implementation. Even if there is no negative impact on our economic situation as a result of the daily differences accumulated up to December 31, 2005, a financial gap has been generated along with negative balance in the gas purchase and sales current account for residential clients. This gap stems from a delay in the bi-annual reestablishment of the pass-through effect mandated by the regulating entity as stated in the distribution license and as a result of the political situation. Thus, there is no guarantee that this effect will continue in the future. We cannot guarantee that we will receive another temporary tariff increase or that, if we do, this will not result in an increase of our tariffs. Moreover, if we do get the approval to increase the proposed tariffs, we cannot guarantee that such increases will not result in an increase of past due accounts from our clients.

On March 21, 2006, ENARGAS issued Resolution No. 3,462, through which the increase of the price of natural gas at wellhead, was incorporated into our tariffs. This increase took effect on July 1st, 2005, with the understanding that the increases that arise from the application of these tariff charts for the period between July 1st, 2005 and February 28, 2006, should be invoiced to the users in eight monthly payments, with two months' grace as of March 1st, 2006, without interests or surcharges. This retroactive charge was invoiced between May 1st and December 31, 2006. For consumptions after March 1, 2006, the new tariffs were applied directly to the respective invoice.

The tariff established through Resolution No. 3,462 maintained the daily differences which were previously in force. This situation had not been updated by ENARGAS at the beginning of every seasonal period, as established in the license, and was generating important imbalances in our gas purchase and sale current account, to be charged to R, P 1, and P 2 clients, and to be returned to the industrial customers.

However, on September 19, 2008, ENARGAS issued Resolution 409/08, which establishes new tariff sub-categories for residential customers, effective from September 1, 2008. Residential customers were divided into eight new sub-categories (R1, R2-1^st, R2-2^nd, R2-3^rd, R3-1^st, R3-2^nd, R3-3^rd and R3-4^th) according to their annual natural gas consumption.

On September 19, 2008, the Energy Secretariat issued Resolution No. 1,070/08 which approved an agreement with the natural gas producers. One of the key features of said agreement is an increase in the price of natural gas at wellhead.

On October 10, 2008, ENARGAS issued Resolution 446/08, which approved new tariff schedules. These new tariff schedules incorporated the increase in the price of natural gas at wellhead approved by Energy Secretariat Resolution No. 1,070/08 into the tariffs for each of the different customer categories established under ENARGAS Resolution 409/08. ENARGAS Resolution 446/08 also eliminated the daily differences which were previously in force. However, as a result of lobbying by consumer associations, on October 20, 2008, ENARGAS issued Resolution 466/08 which reinstated the daily differences for the R1, R2-1^stand R2-2^nd sub-categories of residential customers (less than 800CM /per annum) and sub-distributors.

On December 23, 2008, ENARGAS issued Resolution 566/08 which approved a new tariff schedule, incorporating an additional increase in the price of natural gas at wellhead into the tariffs for the following customer categories: R3-1^st, R3-2^nd, R3-3^rd and R3-4^th.

On April 26, 2006, the Executive Power enacted Law No. 26,095, published in the official Gazette on May 15, 2006, which creates a specific charge destined to the repayment of the extension of Natural Gas Transport Capacity 2006-2008. On September 18, 2006, Decree No. 1,216/06, which regulates such law, was published in the official Gazette. On December 28, 2006, Resolution No. 2,008/06 of the Ministry of Federal Planning, Public Investment and Services approved the actions taken by the Energy Secretariat and ENARGAS in relation to the specific charge created by Law No. 26,095.

During 2005, the Government implemented a fiduciary fund to expand the transmission capacity to 4.7 MMCM. In January 2007, through Resolution No. 3,689/07, ENARGAS stipulated that we are responsible for the invoicing, collection and settlement of another fiduciary fund, the fiduciary fund 2006-2008, and shall invoice and receive the above-mentioned charge from SGP3, and FD ("firm distribution")/FT ("firm transportation") clients from January 1, 2007. Residential, CNG, SGP1, and SGP2 customers are excluded from the fiduciary fund charge. With this second fund, the transmission capacity will be expanded by approximately 22.5 MMCM over the 4.7 MMCM capacity created by the first fund. Both fiduciary funds imply an increase in the transmission cost of, 411% for SGP3 and 462% for FD and FT customers with regard to the 2001 transport tariffs. On December 9, 2010, the Government issued Resolution No. 2,289/10 in order to decrease by 50% the value of the fiduciary fund created in 2005 as it has almost recovered the investments for the expansions. Additionally, the fiduciary fund 2006-2008 was increased by 50%. As a result of both changes, the customer's invoices remain the same.

On November 27, 2008, the Executive Power approved Decree No. 2,067/08 (published in the Official Gazette on December 3, 2008) which created the Trust Fund for Gas Imports ("Fondo Fiduciario para Atender a las Importaciones de Gas"), a fiduciary fund destined for the purpose of importing natural gas. This fund aims to complement the domestic gas production in order to decrease the number of "cut days" and thus guarantee the supply of natural gas in the domestic market.

The following is the list of resources, which comprise the fiduciary fund:

Tariff charges currently being applied to gas transportation and distribution users within all categories

Special credit programs to be entered into with national and international institutions

Specific contribution amounts to be assigned to participants in the gas sector

The following table sets forth our maximum tariff in effect since November 1, 2008 and at December 31, 2010 for each class of service:

Maximum Tariffs at December 31, 2010

	Maximum Tariffs as of December 31, 2010
	City of Buenos Aires Province of Buenos Aires
	(in Pesos)
Residential(a) R1, R2-1st and R2-2nd (CS) (e):
Customer charge(b)	$/invoice	7.744752	7.784675
All consumption(c)	$/CM	0.143651	0.147451
Minimum invoice	$/invoice	13.075555	13.207094
Residential(a) R2-3rd (CS) (e):
Customer charge(b)	$/invoice	7.744752	7.784675
All consumption(c)	$/CM	0.156451	0.160251
Minimum invoice	$/invoice	13.075555	13.207094
Residential(a) R3-1st and R3-2nd (CS) (e):
Customer charge(b)	$/invoice	7.744752	7.784675
All consumption(c)	$/CM	0.197401	0.201201
Minimum invoice	$/invoice	13.075555	13.207094
Residential(a) , R3-3rd and R3-4th (CS) (e):
Customer charge(b)	$/invoice	7.744752	7.784675
All consumption(c)	$/CM	0.247389	0.251189
Minimum invoice	$/invoice	13.075555	13.207094
General Service P1 and P2 (CS) (e):
Customer charge(b)	$/invoice	10.958166	11.014653
0-1,000 CM(c)	$/CM	0.145355	0.148524
1,001-9,000 CM(c)	$/CM	0.136388	0.139511
>9,000 CM(c)	$/CM	0.127422	0.130499
Minimum invoice	$/invoice	12.950560	13.032459
General Service P3 (CS) (e):
Customer charge (b)	$/invoice	10.958166	11.014653
0-1,000 (c)	$/CM	0.217950	0.221120
1,001 - 9,000 (c)	$/CM	0.208983	0.212107
> 9,000 (c)	$/CM	0.200017	0.203095
Minimum charge	$/invoice	12.950560	13.032459
Subdistributors (CS):
Customer charge(b)	$/invoice	10.679295	10.734343
All consumption(c)	$/CM	0.088700	0.091154
General Service P3 (D&T) (f):
Customer charge (b)	$/invoice	10.958166	11.014653
0-1,000 (c)	$/CM	0.039414	0.042583
1,001 - 9,000 (c)	$/CM	0.030447	0.033570
> 9,000 (c)	$/CM	0.021481	0.024558
Minimum invoice	$/invoice	12.950560	13.032459
General Service (D&T):
Customer charge(b)	$/invoice	10.679295	10.734343
Demand charge(d)	$/CM per day	1,0066910	1.0289920
0-5,000 CM(c)	$/CM	0.015288	0.016868
>5,000 CM(c)	$/CM	0.009462	0.011012
Large Volume Firm Service (D&T):
Distribution:
Customer charge(b)	$/invoice	11.200801	11.258537
Demand charge(d)	$/CM per day	0.618001	0.638298
All consumption(c)	$/CM	0.011105	0.012665
Transportation:
Customer charge(b)	$/invoice	11.200801	11.258537
Demand charge(d)	$/CM per day	0.567090	0.587124
All consumption(c)	$/CM	0.003978	0.005501
Large Volume Interruptible Service (D&T):
Distribution:
Customer charge(b)	$/invoice	11.200801	11.258537
All consumption(c)	$/CM	0.033023	0.035181
Transportation:
Customer charge(b)	$/invoice	11.200801	11.258537
All consumption(c)	$/CM	0.025895	0.028017
CNG Firm (D&T):
Customer charge(b)	$/invoice	11.012049	11.068813
All consumption(c)	$/CM	0.004049	0.006363
Demand charge (d)	$/CM per day	0.621027	0.621027
CNG Interruptible (D&T):
Customer charge (b)	$/invoice	11.012049	11.068813
All consumption	$/CM	0.022271	0.024585

Notes:

(a) Residential customers generally are billed on a bimonthly basis. All other customers are billed monthly.

(b) Fixed charge per invoice.

(d) Monthly charge for CM per day of reserved capacity.

(e) CS means complete service and includes distribution, transportation and gas provision.

(f) D&T means distribution and transportation service. After the unbundling (Resolution 752/05), we are forbidden to sell natural gas (commodity) to these customers. The new tariff includes only the distribution and transportation services provided by us.

Renegotiation of the Tariffs

In January 2002, pursuant to the Public Emergency Law, the tariffs we charge our customers were converted from their original Dollar values to Pesos at a rate of Ps. 1.00 to US$ 1.00. Our tariffs were also frozen, as indexation of any kind is not permitted under the Public Emergency Law. The Public Emergency Law also provides that the Argentine Government should renegotiate public utility services agreements affected by the pesification. The pesification and freezing of our tariffs violate express provisions of our license.

According to the Public Emergency Law, the government must consider the following factors when negotiating the new tariff regime:

the effect that new tariffs may have over the economy, especially with regard to competitiveness and income distribution,

the service standards,

the investments which licensed companies have been authorized to make and have made,

consumer protection and accessibility of the services,

the security of the systems, and

our profitability.

The Emergency Law, originally set to expire in December 2003, was extended on multiple occasions to December 31, 2011. As a consequence, the renegotiation terms for licenses and concessions of utility services also were extended.

We cannot assure you as to what the outcome of the renegotiation with the Argentine Government will be. Our main concerns include: whether real tariff increases will be granted at a level sufficient to allow us to meet both our operational costs and financial obligations and to provide a reasonable return on equity and the uncertainty as to when the renegotiations will be completed.

On January 24, 2003, the Argentine Government issued Emergency Decree No. 120/03, which established that the Argentine Government may provide for transition tariff increases or adjustments until the process of renegotiation of public service contracts and licenses required under the Public Emergency Law is completed. On January 30, 03, Decree No. 146/03 and ENARGAS Resolution No. 2,787 provided a transition tariff increase of approximately 10% for the electricity and gas sectors. On January 30, 2003 we began invoicing our customers with the increased tariffs. However, the National Ombudsman, the Ombudsman of the city of Buenos Aires and certain consumer advocacy organizations filed objections to the increased tariff with various courts. Consequently, a court issued a preliminary injunction prohibiting the increase to these tariffs. In accordance with the preliminary injunction, we ceased invoicing our customers at the increased tariff level and resumed invoicing at the former lower tariff levels on February 27, 2003.

Through Decree No. 311/03, dated July 3, 2003, the Argentine Government created UNIREN with the objective of providing advice on the renegotiation of 64 public works and services contracts, and developing a common regulatory framework for all utilities. UNIREN is presided over by the Federal Planning Minister. UNIREN continues the contract renegotiation process developed by the previous Contract Renegotiation Committee and assumes responsibility for all issues in progress.

During 2002 and 2003, although we (i) strictly complied with the submission of all information required, (ii) the very reports made by the CRC and the UNIREN stated that the gas sector posed no difficulties as to the execution of license contracts and the compliance of conditions and obligations committed, and (iii) licensees, including us, complied with the necessary conditions to continue with the process of renegotiation, it was not possible to go beyond Phase II (submission of information) of such renegotiation process.

Although there was an exchange of proposals between public service licensees companiesand the ArgentineGovernment, the process continues to be delayed with no agreement likely in the near future.

On June 7, 2007, UNIREN sent a new proposal which, along with those sent on prior occasions, did not include the increase in tariffs for residential customers, but on the contrary, allowed the roll-over of the above-mentioned increase among the other customer classes to allow the licensee recuperate the distribution margin corresponding to residential customers.

In August 17, 2007, the Argentine Government sent a new proposal, which we answered on August 27, 2007 after a series of meetings between UNIREN and our technical representatives. Finally, UNIREN sent an additional proposal on August 31, 2007, accepting almost every aspect of our suggestions except for the residential increase and the legal claim clauses, which were left out for discussion with the shareholders' legal advisors.

On May 15, 2008, we received a new proposal from UNIREN, which contained some changes in respect of the last proposal sent by us in August 27, 2007 but continued to include the legal claim clauses mentioned above. We answered this proposal in July 2008. On August 11, 2008, the UNIREN replied to our July 2008 proposal.

We replied to UNIREN's August 2008 proposal. However, the government decided to change its strategy and sent us a new proposal instead, with the objective of entering into a transition agreement, as a condition precedent to signing a renegotiation agreement. Finally, we received a new proposal on September 2, 2008 establishing a transition agreement effective as of September 1, 2008. This proposal included an increase in the tariffs associated with gas distribution and transportation services.

After various rounds of negotiation, we signed a transition agreement with UNIREN on September 22, 2008 (the "Transition Agreement"), which was approved by our Shareholders on October 14, 2008. The Transition Agreement was then sent to UNIREN in order to obtain Executive Power approval. On April 14, 2009, the Executive Power issued Decree No. 234/09 approving the Transition Agreement (which includes the increases in the distribution and transportation tariffs as of September 2008). In addition, during June 2010, MetroGAS sent investment records from September 2008 to December 2009 to ENARGAS and UNIREN in accordance with the Transition Agreement.

The Transition Agreement stipulates that residential customers with consumption of up to 800 CM/year will not have any increase in tariffs (currently 62% of MetroGAS' customers and 25% of MetroGAS' sales volume fall into this category). Additionally, tariff increases will be applied to charges per unit of consumption and reserve capacity charges but will not be applied to either fixed charges or minimum charges. The increase will be higher for higher levels of gas consumption and the daily differences accumulated for gas purchases in previous periods will be eliminated. Likewise, the rates and charges that MetroGAS is authorized to charge are to be adjusted by 25%. Once the tariffs are published, we will obtain an estimated increase of 22% of our distribution margin, which will lower the impact on our customers' invoices. We estimate that the transportation and distribution tariff increase will represent an increase of about 6% to 10% in the tariffs paid by our residential customers, 9% to 11% in the tariffs paid by commercial and industrial customers and 2% to 14% in the tariffs paid by our CNG and large customers.

On December 16, 2009, UNIREN sent MetroGAS a letter that sought to enhance the understanding by all parties to the terms of the license renegotiation. Therein, UNIREN identified some changes to the conditions set forth in the Transition Agreement, such as the dynamic segmentation of residential customer invoicing. UNIREN also reaffirmed that the renegotiated license is contingent upon all of our shareholders continuing to hold their shares until the new tariff scheme is in place. While this December 2009 letter moved the dialogue forward, no consensus has been reached between the National Government, the Company, and the Company's shareholders to date.

On February 17, 2010, MetroGAS commenced a legal proceeding in the Federal Administrative Court of Appeals requiring the issuance of an order of action against the Sub-secretary of Coordination and Management Control for its delay in reviewing the proposed MetroGAS tariff schedules. However, on June 8, 2010, MetroGAS terminated this legal claim and commenced a new action before the Federal Administrative Court to require the issuance of an order of action against ENARGAS and the Sub-secretary of Coordination and Management Control, by which they would be obliged to publish the new tariff schedules. On November 30, 2010, MetroGAS' claim was denied because, among other reasons, the court ruled that it is not allowed to interfere with ordinary duties falling under the responsibility of ENARGAS. As of the date of this annual report, there has been no further action on the part of the Sub-secretary of Coordination and Management Control and ENARGAS has not yet issued the proposed MetroGAS tariff schedules even though during 2010, several notices were sent to ENARGAS, UNIREN, and MPFIPS highlighting the difficulties MetroGAS has experienced in maintaining its solvency and the urgent necessity of signing the Renegotiation Agreement.

As of December 31, 2010, we have neither recorded nor invoiced the effects of the Transition Agreement. It is important to highlight that, even if ENARGAS were to issue our proposed tariff schedules, since we have not yet signed a renegotiation agreement with UNIREN, all amounts we receive from customers as a result of the tariff increases established under the Transition Agreement are to be deposited into a trust fund, which funds are to be applied by us to future investments in gas infrastructure projects, with the prior approval of ENARGAS. During 2010, MetroGAS complied with all the necessary steps to form an administrative trust fund with Nación Fideicomisos S.A., and on March 22, 2010, the letter of understanding, signed by both parties, was sent to ENARGAS and the MPFIPS.

Semiannual Adjustments to Tariffs Contemplated by Our License

Except in respect of the seasonal tariff increases to reflect our costs of purchasing gas, all tariff increases have been suspended by the Public Emergency Law. See Item 4: "-Current Tariffs."

The Gas Act and our license contemplate that the distributors' tariffs will be adjusted semiannually to reflect changes in the cost of purchasing and transporting gas and the inflation rate reflected by the U.S. PPI. The purpose of these adjustments is to ensure that the distributor recovers no more and no less than its actual cost of purchasing and transporting gas and to compensate it for assumed increases in other operating costs. The mechanics of these periodic adjustments are specified in our license.

Tariffs are required to be adjusted semiannually in May (for the five-month winter period) and in October (for the seven-month summer period) to reflect projected changes in the cost of purchasing gas. The Gas Act and our license authorize us to pass through to our users the cost of gas purchases by adjusting the price to end users to reflect any change in the actual cost of gas purchased during each tariff period, provided that ENARGAS may limit the pass-through of such cost to the extent it determines that such cost exceeded the costs negotiated by other distribution companies in equivalent circumstances. In August 1994, the Argentine Government enacted Decree No. 1,411/94, which empowers ENARGAS to limit the pass-through of price increases to prices that are no higher than the lowest price for similar quantities of gas purchased under similar conditions from the same basin in the event it should find that the contracts proposed for its review were not the product of a transparent, open and competitive process. We are required to account for differences between the projected cost of gas and the actual cost of gas prudently incurred, with any difference during that period, plus interest, being surcharged upon or credited to customers' bills, as appropriate, through a tariff adjustment.

Pursuant to our license, tariffs are also to be adjusted semiannually in January and July to reflect changes in the U.S. PPI. Our tariffs may also be adjusted in January and July, upon notice to ENARGAS (but only if ENARGAS does not object to such adjustment), to reflect changes in the transportation companies' tariffs pursuant to the transportation licenses and the K Investment Factor. A reduction in transportation tariffs would result in a corresponding reduction in our tariffs. We may apply for an adjustment to tariffs to reflect unforeseen events or certain force majeure occurrences or to reflect changes in the taxes on tariffs. The Gas Act provides that customers may apply for a tariff reduction if warranted by objective and justifiable circumstances.

Gas Purchase Price Adjustments to Tariffs and Related Disputes

We operate in a regulated industry and accordingly, our results of operations depend on the applicable regulatory framework and the interpretation and application of such framework by ENARGAS. We have disagreed repeatedly with ENARGAS' interpretation and application of the regulatory framework. Pursuant to the framework that regulates the public service of distribution of gas in Argentina, our tariffs are required to be adjusted periodically to reflect changes in the cost of purchased gas. Notwithstanding the foregoing, ENARGAS has limited on several occasions the pass-through of the cost of gas we purchased, thus preventing us from recovering approximately Ps. 30 million with respect to our purchases of gas from 1995 through February 2005. We have filed appropriate appeals in respect of these matters. While some of our appeals have been rejected, our appeals related to Ps. 18.3 million of gas purchase costs remain pending.

The enactment of the Public Emergency Law and of Decree No. 214/02 had the effect, among others, of fixing the price we pay for gas under our Gas Purchase Contracts. However, the Public Emergency Law and this decree do not affect the prices at which we purchase gas in the spot market, which we expect to be substantially higher than the prices we pay for gas under our Gas Purchase Contracts. We are unable to predict the level of our gas purchases in the spot market because it is affected by a number of unpredictable variables, including average temperatures and the rainfall levels in winter. There is a risk that ENARGAS may deny the pass-through to our customers, via tariffs, of the entire amount of our costs incurred in purchasing gas in the spot market within the terms of Decree No. 1,020/95. See Item 4: "-Commercial Contracts-Natural Gas Purchase Contracts-Limitations on Short-Term Gas Purchase Contracts." Notwithstanding the foregoing, we do not purchase gas in the spot market, since, through the Government's intervention over the domestic gas market in 2004 and the execution of several gas supply agreements between gas producers and the Government, we have been told to meet our non-interruptible demands.

Future interpretations and applications of the regulatory framework by ENARGAS, including future limitations of passing on important costs of gas, can adversely and substantially affect us.

U.S. PPI Adjustments to Tariffs and Related Disputes

On January 10, 2000, ENARGAS issued Resolution No. 1,477/00, which adjusted our tariffs as of January 1, 2000, but did not include an adjustment reflecting an increase in the U.S. PPI as contemplated by our license prior to the enactment of the Public Emergency Law. This adjustment would have resulted in a 3.78% increase in the transportation and distribution components of our tariffs as of that date. This was due to the fact that, in negotiations with ENARGAS and the Argentine Government, the distribution and transportation companies agreed to defer the billing of the amounts related to the U.S. PPI adjustment for the first six months of such year. Moreover, ENARGAS established, through the same resolution, the methodology to recover during the ten-month period following July 1, 2000 the uncollected amounts attributable to the application of the U.S. PPI for the first half of 2000.

On July 17, 2000, the distribution and transportation companies, ENARGAS, and the Argentine Government agreed to increase tariffs as of July 1, 2000 (a) to reflect the U.S. PPI adjustment which, by virtue of the agreement referred to in the preceding paragraph, was not added to tariffs as of January 1, 2000, and (b) by the amount that would have been billed during the first six months of 2000 on account of such U.S. PPI adjustment if it had been added to tariffs on January 1, 2000 and to have such increase recovered, together with accrued interest, as follows: (x) 30% from July 1, 2000 through April 30, 2001, and (y) the remaining 70% from October 1, 2000 through April 30, 2001. Additionally, they agreed to defer the billing of the amounts related to the U.S. PPI adjustments for the period from July 1, 2000 through June 30, 2002 and to create a "PPI Stabilization Fund." The PPI Stabilization Fund became effective on July 1, 2000 and was comprised of the amounts that result from the difference between the tariffs actually charged and the tariffs that would have been charged through June 30, 2002 if such U.S. PPI adjustment had been added to tariffs as contemplated by the regulatory framework. The Argentine Government ratified the foregoing by Decree No. 669/00 dated August 4, 2000. In light of the foregoing, we accrued the deferred amount during the deferral period, together with interest at an 8.2% annual rate.

On August 29, 2000 we were notified that, in a proceeding initiated by the National Ombudsman of Argentina, a court order had been issued, which suspended Decree No. 669/00 on the grounds that the tariff adjustment pursuant to a mechanism of indexation based on a foreign index was illegal under the Convertibility Law. An appeal against the injunction and a challenge to the National Ombudsman's jurisdiction was made by ENARGAS, the Ministry of Economy, and the gas licensees (including us) but was rejected. ENARGAS subsequently informed us that the tariffs would revert to the ones in force prior to Decree No. 669/00, that is, without the U.S. PPI linkage. Since the Public Emergency Law eliminated the U.S. PPI adjustment of tariffs, we are not pursuing the appeal of such decision to the Supreme Court. However, we will continue to challenge the decision ruling the U.S. PPI adjustment illegal and will try to recover the benefits of such adjustment up to the effective date of the Public Emergency Law.

In view of the above described scenario and the recent developments which have occurred in the context of the Argentine financial crisis explained above, we wrote off as an "Extraordinary Loss" in 2001 the difference between the income we had accrued during 2000 and 2001 attributable to unbilled U.S. PPI adjustments less expenses we had accrued during such period on account of increases in transportation tariffs attributable to U.S. PPI adjustments that we would have paid to TGS and TGN. The reversal should not be understood as a waiver of rights arising out of the Regulatory Framework that governs our activities or as an abandonment of any of the actions filed by us to date.

On February 1, 2002, ENARGAS, according to the Emergency Law, approved tariffs without including the U.S. PPI adjustment. Consequently, we have filed an administrative action, the resolution of which remains pending as of the date of this annual report.

Five-Year Tariff Review Contemplated by Our License

Under the Gas Act, the regulations thereunder, and the pertinent provisions and formulae contained in our license, ENARGAS is responsible for determining the distribution tariffs that are to be in effect during each succeeding five-year period following the initial five-year period ended December 31, 1997. This determination is to be made on the basis of rules that ENARGAS promulgated on March 12, 1996. The Gas Act requires that, in formulating such rules, ENARGAS must provide the companies with (1) an opportunity to collect revenues sufficient to recover all proper operating costs reasonably applicable to service, taxes and depreciation and (2) a reasonable rate of return, determined in relation to the rate of return of businesses having comparable risk, efficiency and quality of service.

The tariff-setting methodology contemplated by the Gas Act and our license is the "price-cap with periodic review" model. This methodology has been adopted by a number of other countries and is commonly referred to by its mathematical expression "RPI-X+K." Since the international market indicator selected by Argentina was the U.S. PPI published by the Bureau of Labor Statistics and the United States Department of Labor, the Argentine tariff adjustment formula is more correctly expressed as "U.S. PPI-X+K." The tariff-setting methodology differs from the form of utility regulation utilized in the United States primarily with respect to the length of the period between regulatory reviews, and in being forward-looking rather than historical-cost-based.

Under the Argentine model, distribution tariffs may be adjusted by the X Efficiency Factor and the K Investment Factor (both of which were set at zero for the initial five-year period). Based upon the regulatory theory that distribution tariffs should provide a reasonable return and that the benefit of increased efficiency should be shared by the consumer and the distribution company, the inclusion of an efficiency factor results in a mandatory decrease in distribution tariffs on the assumption that operating efficiencies will decrease the distribution companies' costs each year. The inclusion of the X Efficiency Factor in the pricing system provides the distribution company with an incentive to cut costs. If the distribution company is able to decrease costs faster than the rate implied by the X Efficiency Factor, the savings become increased profits; if the distribution company is unable to meet or exceed this rate, the shortfall reduces its profits. The adjustment to account for efficiencies is proposed by ENARGAS, using specific plans for efficiency improvements submitted by us and taking into account both the expected cost savings and the investment required for the implementation of such plans. ENARGAS is required to propose the X Efficiency Factor as it applies to us not later than 12 months prior to the commencement of the five-year period for which it is to apply following which proposal we have a four-month period in which to respond to ENARGAS. A final X Efficiency Factor is to be fixed by ENARGAS not later than six months prior to the commencement of the relevant five-year period.

The inclusion of the K Investment Factor in the formula specified in our license is intended to permit an increase in distribution tariffs at the time of their adjustment to compensate us for certain investments approved by ENARGAS. The investments contemplated by the K Investment Factor are those designed to improve the efficiency, safety or reliability of the system, and may either be required by ENARGAS to be made or may initially be proposed to be undertaken by us. In either case, however, the commitment to make such investments during the five-year period will be binding on us. We also may petition ENARGAS at any time for a distribution tariff adjustment relating to proposed investments to expand system capacity. ENARGAS, based on an investment plan submitted by us 18 months prior to the commencement of the relevant five-year period, is required to propose K Investment Factors not later than 12 months prior to the commencement of the relevant five-year period, following which we will have a four-month period in which to respond to ENARGAS' proposal. A final K Investment Factor and related investment program are to be fixed by ENARGAS not later than six months prior to the commencement of the relevant five-year period.

If we do not agree with the X Efficiency or K Investment Factors established by ENARGAS, or with the terms of a mandatory investment program established by ENARGAS, the distribution tariff established by ENARGAS will be applied, but we may seek review of ENARGAS' actions by administrative or judicial procedures.

Five-Year Tariff Review and Related Disputes

During the period from January 1998 through December 1999, the tariffs that we charged to our clients have been adjusted through ENARGAS resolutions, according to our license (See Item 4: "-Regulatory Framework-Tariffs-Semiannual Adjustments to Tariffs Contemplated by Our License) that requires that tariffs have to be adjusted in January and July to reflect changes in the U.S. PPI, in the transportation and distribution components of our tariffs and in the K Investment Factor resulting from investments.

Through Resolution No. 1,477/00, dated January 10, 2000, ENARGAS adjusted our tariffs as of January 1, 2000, applying the K Investment Factor resulting from investments, resulting in a distribution margin increase of 0.51% applicable to residential customers, of 0.37% applicable to small volume general services and of 0.44% applicable to CNG users. Moreover, ENARGAS established, through the same resolution, the methodology to recover the accrued revenues corresponding to the application of the U.S. PPI during the first half of 2000.

Through Resolution No. 1,804, ENARGAS adjusted our tariffs as of July 1, 2000 as follows: (a) it adjusted the transportation and distribution component of our tariffs for the second half of 2000 in order to reflect changes in U.S. PPI, which resulted in an increase of 3.7751%, in addition to a recovery of the accrued debt for the balance of tariffs that were not billed from January through July 2000, and (b) applying the adjustment pursuant to the K Investment Factor to such six-month period resulting from investments, resulting in an increase of the distribution margins as follows: residential-0.48%, small volume general users-0.35%, and CNG-0.41%. ENARGAS applied such U.S. PPI recovery pursuant to a deed whereby there was established the financing mechanism for the tariff adjustment for the first six-month period of the year 2000. The Executive Power approved such deed and the financing mechanism through Decree No. 669/00. Nevertheless, on August 29, 2000, we received notice of a court order suspending Decree No. 699/00, and accordingly, ENARGAS informed us that the tariffs should be reduced to exclude the U.S. PPI adjustment. See "-U.S. PPI Adjustments to Tariffs and Related Disputes."

Pursuant to Resolution No. 1,941, ENARGAS adjusted our tariffs for the period from October 1, 2000 to January 1, 2001 by replacing the winter price of gas with the summer price of gas.

Through Resolution No. 2,070, ENARGAS adjusted our tariffs as of January 1, 2001, applying the K Investment Factor resulting from investments, resulting in an increase of the distribution margins as follows: residential-0.45% and small volume general users-0.33%.

Pursuant to Resolution No. 2,347, ENARGAS adjusted our tariffs as of July 1, 2001 applying the K Investment Factor from investments, resulting in an increase of the distribution margins as follows: residential-0.36%, small volume general users-0.27%, and users of CNG-0.32%. ENARGAS approved a K Investment Factor value that is lower than the one we requested, even though the works carried out during the first semester of 2001 were completed. This results from an interpretation by ENARGAS of the commitment undertaken by us at the time, assuming an excess of up to 5% of the total project's extension. We have appealed this interpretation of our tariffs.

Through Resolution No. 2,487, ENARGAS approved our tariffs as of January 1, 2002 maintaining the existing values expressed in Pesos as of October 2001 in accordance with the Public Emergency Law.

Through Resolution No. 2,611/02 dated May 31, 2002, ENARGAS provisionally approved the tariff chart effective from May 1 to June 30, 2002 with a gas component value identical to the one approved for the previous winter period. In July and August 2002, ENARGAS, through Resolutions No. 2,653 and 2,691, established the extension of the tariff charts approved by Resolution No. 2,611/00 for an undetermined period of time.

In December 2000, ENARGAS submitted to natural gas distribution and transportation licensees a set of documents prepared by local and international consultants under the guidance of a think-tank, Foundation for Latin American Economic Research, or "FIEL," which would provide the basis for the preparation of the methodology, or the "Methodology," for the Second Five-Year Tariff Review, or "RQT II," that would determine the tariff structure applicable from January 1, 2003 to December 31, 2007.

In order to perform the tasks required by a complex process such as the five-year tariff review, we set up a working group formed by representatives of our various departments, with comprehensive interaction between a Technical Committee and a Coordinating Committee. The complex economic and financial environment and the successive changes at the Energy Secretariat, the government agency responsible for long-term energy policymaking, delayed issue of the Methodology by ENARGAS.

On April 6, 2001, ENARGAS informed the gas transportation and distribution licensees of the Methodology, and further advised the licensees to carry out the following regulatory adjustments during the RQT II:

A comprehensive review of rate levels ("full rate case") in order to correct any possible distortions that may have accumulated since privatization.

Regulatory structure reforms to optimize system operation and expansion.

Ensuring service quality and reliability and defining the circumstances under which distributors must guarantee gas supply and main system liability during the winter months.

Accounting segregation of the business of distribution licensees into marketing (gas supply and transportation) and distribution activities, as from January 2003.

Redefinition of small and large general service users, with the possibility of a commercial bypass.

In May 2001, ENARGAS released a document on the methodology for determination of the cost of capital that would be used to discount the cash flows of income and expenses related to the new five-year period. This methodology would be used to determine the "reasonable profit" of gas transportation and distribution licensees for the period 2003 to 2007. We submitted comments on this methodology and requested clarification on the guidelines established at that time. In addition, we submitted information on the tariff base, which involves investments made from the beginning of operations until the year 2000, as well as itemized information on demand, sales and expenses during the year 2000. Nevertheless, ENARGAS established rates that did not meet our expectations and we have appealed such rate and the methodology used to establish it.

In November 2001, we submitted to ENARGAS a suggested investment program for the period 2003 through 2007, which would be financed with the tariff base to be fixed for January 1, 2003 and with the K Investment Factors. We made the implementation of the investments contingent on the possibility of obtaining funds in capital markets at reasonable rates under the circumstances.

Towards the end of 2001, ENARGAS required us to provide expenditure projections for the period 2003 through 2007. We requested an extension with respect to ENARGAS' request, as it was not possible for us to determine the impact that changes in the Argentine economy, the devaluation of the Peso and the passing of the Public Emergency Law and its implementing regulations could have on the prices of domestic and imported goods and services.

Finally, in a note dated February 8, 2002, ENARGAS declared the suspension of terms fixed for the RQT II process until the renegotiation process provided for by the Public Emergency Law was conducted.

Surcharge on Gas Consumption

Law No. 25,565 and Decree No. 786/02 created a surcharge, applicable from the date of enactment of such Decree (May 8, 2002), of Ps. 0.004 per cubic meter of gas applicable to all gas consumption, or the "Surcharge." The Surcharge is levied to finance a special subsidy aimed at reducing tariffs of residential users in certain regions of Argentina.

The gas producers are required to act as collection agents of the Surcharge and must include the amount of the Surcharge into their invoices for sales of gas to distributors, which are entitled to pass on such Surcharge to their customers. Decree No. 786/02 establishes certain mechanisms to ensure that gas distribution companies will be able to pass through the cost of the Surcharge without suffering any losses or obtaining any gain.

Changes in Regulations

As a result of the economic volatility experienced in Argentina since 2001, the Argentine Government put in place various regulatory measures to attempt to mitigate the adverse effects on the energy sector that have developed.

In February 2004, the Executive Power issued Decree No. 180/04, which (i) created a special trust fund for new transportation and distribution infrastructure, (ii) created the EGM to coordinate and centralize all transactions related to spot gas purchases and secondary transportation and distribution markets, (iii) replaced, amended and introduced terms and conditions of certain distribution categories, (iv) allowed the re-sale of distribution services by distribution users under certain conditions, and (v) authorized the natural gas distributors to have a controlling stake in natural gas marketers. See Item 4: "Information of the Company-Business Overview."

Also in February 2004, the Executive Power issued Decree No. 181/04 allowing the Energy Secretariat to enter into an agreement with the natural gas producers tointer alia adjust the price of natural gas at the point of entry of the transportation system payable by natural gas distribution companies. The agreement established in this Decree was promulgated by Resolution No. 208/04.

Pursuant to Decrees Nos. 180/04 and 181/04, the Energy Secretariat and ENARGAS issued several regulatory rules providing for, among other things, the suspension of exports of natural gas, the setting of discounts or surcharges to certain users, the creation of a regime of curtailments to the transportation and distribution services aiming to guarantee the supply of natural gas to the domestic market, and particularly, non-interruptible users. Subsequently, a set of resolutions and provisions was issued to regulate the abovementioned executive orders. The main provisions refer to: (i) suspension of the exportation of surpluses of natural gas useful for internal supply, (ii) development of a Rationalization Program for the Exportation of Natural Gas and Use of Transportation Capacity, (iii) ratification of the Agreement for the Implementation of the Schedule for the Normalization of Gas Prices at Points of Entry into the Transportation System, through which we have restructured all of its natural gas purchase contracts, (iv) prizes for reduced consumption below defined thresholds and the application of additional charges to certain customers that exceed those thresholds, which are established by the Program for the Rational Use of Energy ("PURE"), suspended from September to April of each year, (v) creation and constitution of a Trust System through a Trust Fund, (vi) approval of a useful curtailment mechanism to ensure supply to non interruptible customers, and (vii) approval of the Implementation Agreement of the EGM between the BCBA and the Energy Secretariat through which EGM started functioning.

In May 2005, the Energy Secretariat issued Resolution No. 752/05, which established the so-called "unbundling" regime by setting forth that, as of August 1, 2005 (later extended to September 1, 2005 by Resolution 930/05), natural gas distributors would not be allowed to sell natural gas to, firm and interruptible large consumers, General Service "G" consumers, and those General Service "P" consumers whose average monthly consumption in the last year was greater than 150,000 CM. Resolution No. 752/05 also established that, as of January 1, 2006, natural gas distributors would not be allowed to sell natural gas to those General Service "P" consumers whose average monthly consumption in 2005 was in excess of 9,000 CM or CNG supply stations (the January 1, 2006 deadline for these two consumers was later modified by Resolution No. 2,020/05 as analyzed below).

In December 2005, the Energy Secretariat issued Resolution No. 2,020/05, which supplements Resolution No. 752/05 and modified the "unbundling" deadlines established by the latter as follows: (i) for General Service "P" consumers that during the period April 2003-March 2004 consumed between 30,000 CM/month and 150,000 CM/month, January 1, 2006, (ii) for General Service "P" consumers that during the period April 2003-March 2004 consumed between 15,000 CM/month and 30,000 CM/month, March 1, 2006, (iii) for General Service "P" consumers that during the period April 2003-March 2004 consumed between 9,000 CM/month and 15,000 CM/month, not specified up to date, and (iv) for CNG supply stations, March 1, 2006 (this last deadline was further extended to April 1, 2006 by Resolution No. 275/06).

Resolution No. 2,020/05 also (i) excludes non-profit civil associations, labor unions, healthcare providers, and private or public education providers from the unbundling regime, (ii) provides certain restrictions purchasing natural gas to prevent antitrust practices, and (iii) creates the "Mechanism of Allocation of Natural Gas for CNG Supply Stations," through which CNG supply stations are granted natural gas following the sale offers and purchase demands filed by natural gas producers and CNG supply stations before the EGM.

In February 2006, the Energy Secretariat issued Resolution No. 275/06 whereby it required the natural gas distributors to act as proxies of the CNG supply stations at the first event of the "Mechanism of Allocation of Natural Gas for CNG Supply Stations" and to act on their behalf by (i) carrying out the nominations and deliveries of natural gas until September 30, 2006 for no consideration, (ii) filing irrevocable offers before EGM and (iii) executing the corresponding natural gas purchase agreements. As of the date of this report, two occurrences of the aforementioned Mechanism of Allocation of Natural Gas for CNG Supply Stations were conducted before the EGM.

On September 22, 2006, the Energy Secretariat issued Resolution No. 1,329/06, which covers the following aspects of gas the industry: (i) it defines the volumes of natural gas that producers must commit to inject into the transportation system, (ii) sets a priority regime regarding nominations and natural gas nominations' confirmation to be complied with by producers and transportation companies, contemplating a penalty for non-fulfillment of their duties, (iii) categorizes as uninterruptible the "initial minimum reserve" of CNG stations operating in February 2004, (iv) incorporates a mechanism through which natural gas distribution companies will have to register unbalanced volumes resulting from the consumption of CNG stations that are below the distribution companies' nominations; those unbalanced volumes are then invoiced by the corresponding producers to the distribution companies at CNG price, or else compensated between them in the sphere of bargain and sale agreements that they may have in force, and (v) enables natural gas distribution companies to use specific natural gas volumes included in natural gas bargain and sale agreements that users enter into directly with producers, under certain conditions.

On May 21, 2007, through Decree No. 571/07, the Argentine Government imposed the intervention of ENARGAS for a period of 180 days, which was subsequently extended for additional 180 day periods by Decrees Nos. 1,646/07, 953/08 2,138/08, 616/09, 1,874/09, 1,038/10 and 1,688/10. The intervention currently is effective until July 2011. We cannot assure you that this intervention will not negatively affect our business area in the immediate future. We cannot assure you that the interpretation and application of the above mentioned regulations, together with any future changes to ENARGAS and the regulatory framework would not materially and adversely affect us.

On May 7, 2008, ENARGAS issued Resolution No. 259/08 repealing former Resolution No. 622/98 and establishing a more flexible regime regarding natural gas specifications (the "New Specification Regime"). The New Specification Regime was designed tointer aliaalleviate the Argentine energy crisis by softening the specifications required for the injection of natural gas into the transportation systems. Resolution No. 259/08 provides for procedures and guidelines to guarantee the natural gas quality specifications and the protection and security of the transportation systems. Pursuant to the New Specification Regime, volumes of natural gas that do not meet the specifications may be injected into the transportation system provided that upon their mix with the rest of the natural gas injected by other gas producers, they do not alter the specifications below those set forth in the New Specification Regime. Therefore, in order to inject natural gas that does not meet the required specifications the produced must enter into a so-called "Quality Correction Agreement" with other producers whose natural gas meets the specifications provided in the New Specification Regime. Pursuant to the New Specification Regime, such agreements could also be entered into between producers and transporters provided that the mixture of the producers' low quality natural gas with the higher quality natural gas injected into the transporter's pipeline meets the specifications set forth in the New Specification Regime.

On September 19, 2008, ENARGAS issued Resolution No. 409/08, which established new tariff sub-categories for residential customers, effective September 1, 2008. Residential customers were divided into eight new sub-categories (R1, R2-1^st, R2-2^nd, R2-3^rd, R3-1^st, R3-2^nd, R3-3^rd and R3-4^th) according to their annual natural gas consumption.

On October 10, 2008, ENARGAS issued Resolution No. 446/08, which approved new tariff schedules. These new tariff schedules incorporated the increase in the price of natural gas at wellhead approved by Energy Secretariat Resolution No. 1,070/08 into the tariffs for each of the different customer categories established under ENARGAS Resolution No. 409/08. ENARGAS Resolution No. 446/08 also eliminated the daily differences previously in force. However, as a result of lobbying by consumer associations, on October 20, 2008, ENARGAS issued Resolution No. 466/08 which reinstated the daily differences for the R1, R2-1^stand R2-2^nd sub-categories of residential customers (less than 800CM /per annum) and sub-distributors.

On November 27, 2008, the Executive Power approved Decree No.2,067/08 (published in the Official Gazette on December 3, 2008) which created the Trust Fund for Gas Imports, a fiduciary fund established for the purpose of financing the future imports of natural gas and LNG.

On December 23, 2008, ENARGAS issued Resolution No. 566/08 which approved a new tariff schedule, incorporating an additional increase in the price of natural gas at wellhead into the tariffs for the following customer categories: R3-1^st, R3-2^nd, R3-3^rd and R3-4^th.

On October 4, 2010 ENARGAS issued new dispatch rules named "Procedure for Gas Applications, Confirmations and Control" governinginter alianatural gas injection by producers and natural gas nominations by distributors. Since October 1, 2010, when such Procedure entered into force, MetroGAS has nominated daily the total volume of natural gas needed in accordance with the Procedure to supply its non-interruptible demand. See Item 4-Commercial Contracts-Natural Gas Purchase Contracts.

Creation of ENARSA

On November 2, 2004, the Argentine Congress enacted Law No. 25,943, pursuant to which a new state-owned energy company, "Energia Argentina Sociedad Anónima" or "ENARSA," was created. According to Law No. 25,943, ENARSA shall be authorized, among other activities related to the energy industry, to participate in natural gas transportation and distribution activities on its own by means of a third party or associated with third parties. Whether, and to what extent, the creation of ENARSA will affect our operations or whether ENARSA will ever be engaged in natural gas transportation and/or distribution activities remains uncertain.

Electronic Gas Market Opening

The EGM commenced operations on June 6, 2005 with the participation of certain natural gas producers and distribution companies. The EGM is intended to function as a centralized market through which spot-market and some of the transportation capacity resale market transactions will occur. The EGM currently carries out spot market transactions but it is expected to also carry out futures transactions following approval by the Energy Secretariat. The aim of the EGM is to increase business transparency and to balance the spot market prices.

Circular No. 05/05 of the EGMopened a registration period for agents willing to operate in the EGM. On March 18, 2005, our Board of Directors approved the creation of a new company, MetroENERGÍA S.A., or MetroENERGÍA, which was established to trade on the EGM on its own behalf and on behalf of third parties. We are the controlling shareholder of MetroENERGÍA and own 95% of its capital stock and BG Argentina and YPF own 2.73% and 2.27% of MetroENERGÍA capital stock respectively.

Organizational Structure

We are not part of a corporate group. See Item 7: "Major Shareholders and Related Party Transactions."

Property, Plants and Equipment

Our principal properties consist primarily of distribution mains, service pipelines, pressure reduction stations, regulators, valves, meters and real estate for central, operational and branch offices. These properties are located in our service area and are described above. See Item 4: "-Business Overview-Power Plants."

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

In addition to the management discussion below, you should carefully read our Annual Consolidated Financial Statements and selected consolidated financial and operating data included elsewhere in our annual report for additional information about us.

The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. These forward-looking statements include, among others, words such as "anticipates," "believes," "could," "estimates," "expects," "foresees," "intends," "may," "should" or "will continue" and similar language. Actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth elsewhere in our annual report. See "Forward-looking Statements and Associated Risks." For a discussion of important factors, including, but not limited to, the pesification of our tariffs and other factors that could cause actual results to differ materially from the results referred to in the forward-looking statements, see Item 3: "Key Information-Risk Factors."

We maintain our financial books and records and publish our consolidated financial statements in Pesos as of February 28, 2003 and prepare our consolidated financial statements in accordance with Argentine GAAP. Significant differences exist between Argentine GAAP and U.S. GAAP, which might be material to the financial information herein. Such differences involve methods of measuring the amounts shown in our Annual Consolidated Financial Statements as well as additional disclosures required by U.S. GAAP and Regulation S-X of the Exchange Act. See Notes 17 and 18 to our Annual Consolidated Financial Statements contained in Item 18 of our annual report for a description of the principal differences between Argentine GAAP and U.S. GAAP as they relate to us and reconciliation to U.S. GAAP of our net income and shareholders' equity.

During 2010, Argentine inflation measured by CPI increased by 10.9% as compared to the 7.7% increase in 2009 and the wholesale price index rose by 14.6% as compared to the 10.3% increase in 2009. Additionally, the GDP increased by 9.2% in 2010, a significant recoverability from the 0.9% increase reported for 2009.

The Argentine economy had been mired in a severe economic recession that began in the second half of 1998 and lasted until the end of 2002. In addition the Peso was devalued against the U.S. Dollar by 237.0% from late 2001 through December 31, 2002. The Peso appreciated against the U.S. Dollar by 13% in 2003 compared to 2002 and devalued between 1% and 3% from 2003 to 2007. Recently, the Peso devalued by 10% against the U.S. dollar in 2009 compared to 2008 and 2008 compared to 2007, and 5% in 2010 compared to 2009.

The following table shows Argentina's annual GDP growth for the indicated years.

	Argentine Gross Domestic Product
	December 31,
	2010	2009	2008	2007	2006
Gross domestic product growth (annual %)	9.2	0.9	6.8	8.7	8.5

Source: INDEC, Banco Nación.

The following table shows annual percentage changes in Argentina's wholesale and consumer price indexes for the indicated years.

	Argentine Price Indexes
	December 31,
	2010	2009	2008	2007	2006
Wholesale price index (annual % change)	14.6	10.3	8.9	14.4	7.2
Consumer price index (annual % change)	10.9	7.7	7.2	8.5	9.8

Source: INDEC, Banco Nación.

Our financial results continue to be negatively affected by the drastic political and economic changes that took place in Argentina in 2002. Because the political and economic environment is currently in flux, the following discussion may not be indicative of our current or future results of operations, financial position, liquidity or capital resources and may not contain information necessary to help you understand the information contained in this discussion. In particular, it may be difficult to discern trends from our historical financial statements due to the following factors:

the volatility of the exchange rate; and

the reintroduction of inflation accounting.

Accordingly, the following discussion should be read in conjunction with, and is qualified in its entirety by, the Risk Factors contained in our annual report. The most important factors affecting our results of operations were the following:

Pesification of our tariffs

Prior to 2002, our tariffs were denominated in U.S. Dollars and billed to our customers in Pesos. The Public Emergency Law abolished Dollar-denominated tariffs and converted the Dollar values of all public service tariffs (including our tariffs) into Pesos at a one-to-one exchange rate. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Argentina-The devaluation of the Peso, the pesification and freezing of our tariffs, and the macroeconomic conditions currently prevailing in Argentina have had, and may continue to have, a material adverse effect on our results of operations and financial condition."

Freezing of our tariffs

Our Dollar-denominated tariffs were adjusted semiannually to reflect changes in the U.S. PPI. The Public Emergency Law abolished such adjustments and instituted a freeze on our tariffs, which is still in effect.

In January 2002, the Executive Power issued Law No. 25,561 (the "Public Emergency Law") by which it was able to convert the public service companies' tariffs from their original U.S. Dollar values to Pesos at a rate of Ps. 1.00 per US$ 1.00 and freeze them at that rate. The Public Emergency Law also authorized the Argentine Government to renegotiate public service companies' licenses (including our license). We are currently negotiating with theUnidad de Renegociación y Análisis de Contratos de Servicios Públicos ("UNIREN"), an organization established by the Argentine Government, to renegotiate the license contracts and the tariffs that we may be able to charge in the future.

After various rounds of negotiation, we signed a Transition Agreement with UNIREN on September 22, 2008 (the "Transition Agreement"), which was approved by our Shareholders on October 14, 2008. The Transition Agreement was then sent to UNIREN in order to obtain Executive Power approval. On April 14, 2009, the Executive Power issued Decree No. 234/09 approving the Transition Agreement (which includes the increases in the distribution and transportation tariffs as from September 2008). See Item 4: "Information on the Company- Regulatory Framework-ENARGAS-Current Tariffs" for more details on the Transition Agreement. In addition, during June 2010 MetroGAS sent investment records from September 2008 to December 2009 to ENARGAS and UNIREN in accordance with the Transition Agreement.

On February 17, 2010, MetroGAS commenced a legal proceeding in the Federal Administrative Court of Appeals requiring the issuance of an order of action against the Sub-secretary of Coordination and Management Control for its delay in reviewing the proposed MetroGAS tariff schedules. However, on June 8, 2010, MetroGAS terminated this legal claim and commenced a new action before the Federal Administrative Court to require the issuance of an order of action against ENARGAS and the Sub-secretary of Coordination and Management Control, by which they would be obliged to publish the new tariff schedules. On November 30, 2010, MetroGAS' claim was denied because, among other reasons, the court ruled that it is not allowed to interfere with ordinary duties falling under the responsibility of ENARGAS. As of the date of this annual report, there has been no further action on the part of the Sub-secretary of Coordination and Management Control and ENARGAS has not yet issued the proposed MetroGAS tariff schedules even though during 2010, several notices were sent to ENARGAS, UNIREN and the MPFIPS highlighting the Company's need to reach a definite consensus in order to successfully sign the Renegotiation Agreement.

Consequently, as of December 31, 2010, the Company has neither recorded nor invoiced the effects of the Transition Agreement. It is important to highlight that, even if ENARGAS were to issue our proposed tariff schedules, since we have not yet signed a renegotiation agreement with UNIREN, all amounts we receive from customers as a result of the tariff increases established under the Transition Agreement are to be deposited into a trust fund, which funds are to be applied by us to future investments in gas infrastructure projects, with the prior approval of ENARGAS. During 2010, MetroGAS complied with all the necessary steps to form an administrative trust fund with Nación Fideicomisos S.A. On March 22, 2010 the Letter of Understanding ("Memorando de Entendimiento"), signed by both parties, was sent to ENARGAS and the MPFIPS.

Devaluation

The Public Emergency Law eliminated the U.S. Dollar-Peso parity in March 2003. Soon after the enactment of the Public Emergency Law, the Argentine Government permitted the Peso to float freely against the U.S. Dollar with a resulting decline in the Peso's value in relation to the U.S. Dollar. Substantially all of our indebtedness is denominated either in U.S. Dollars or Euros and a material portion of the capital assets we acquire are imported and paid for in U.S. Dollars. As a result, the amount of our indebtedness and of our capital expenditures has increased substantially in Peso terms. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Argentina" and Item 11: "Quantitative and Qualitative Disclosure About Market Risk."

Inflation and inflation accounting

During 2000, Argentina experienced deflation of 0.7% and inflation of 2.4% measured in terms of the consumer price index and the wholesale price index, respectively. In 2001, the consumer price index and the wholesale price index decreased by 1.5% and 5.3%, respectively. During 2002, Argentina experienced inflation of 41% and 119% measured in terms of the consumer price index and the wholesale price index, respectively. As a result of high inflation, Argentine GAAP reintroduced inflation accounting. The most important impact of inflation on our operating results was the incorporation into our consolidated financial statements the effect of exposure of our monetary assets and liabilities to inflation and the restatement in constant currency of our statement of operations accounts. The principal effect on our balance sheet and our shareholders' equity was the restatement of our non-monetary net assets in Pesos. See "Presentation of Financial Information."

Elimination of access to financing

Another factor that adversely affected our results of operations and financial position was the elimination of access to financing. Although we were able to restructure a significant part of our debt in 2006, we nonetheless still have limited access to both local and international financing. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Us- Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors have issued an opinion that contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern" and Item 5: "-Liquidity and Capital Resources."

In addition, after the crisis at the beginning of 2002, we refocused our strategy on the short-term risks and challenges facing us. Since then, our short-term strategy has been aimed at working with the Argentine Government in order to expedite decisions and obtain tariff increases that ensure continuity of our operations, maintenance of safety and quality standards and coverage for debt repayment. See Item 4: "Information on the Company-Business Overview-Regulatory Framework-Tariffs-Renegotiation of the Tariffs."

Voluntary Reorganization Proceeding (concurso preventivo)

The adverse financial conditions we face as a result of this continued delay in our tariff and license negotiation led our Board of Directors to approve our filing of a petition for voluntary reorganization (concurso preventivo) in an Argentine court on June 17, 2010. This reorganization filing generated an event of default under our outstanding debt obligations. Pursuant to the terms of our outstanding debt obligations, this default resulted in the automatic acceleration of our outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on our outstanding debt obligations. See Item 3: "Key Information-Risk Factors Relating to Us-Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors have issued an opinion that contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern."

Our management has also taken and continues to take a variety of actions aimed at mitigating the impact of the current economic crisis on us, the following of which are among the most important:

strict management of cash-flow to adjust our financial expenditures to the funds available to us;

reduction of capital expenditures and preventive maintenance programs, the reduction of which do not affect our ability, in the near term, to serve our customers safely or operate our network in accordance with quality and environmental standards;

tight control of all price adjustment requests from suppliers and required extension of payment terms;

detailed listing of our contractual obligations payable and receivable in order to assess the level of our legal, economic and financial exposure and to determine our action plan for renegotiating and adjusting contracts in light of our prospects; and

securing any necessary tax advice in order to make the best possible tax use of past and future tax losses.

Even though we took the measures mentioned above to mitigate the effects on our business of the current crisis, our future remains highly uncertain.

Effects on Our Results of Operations and Liquidity in Future Periods

The economic situation in Argentina remains highly volatile and has affected our results of operations. In particular, we expect that the following circumstances may have a material effect on our results of operations and liquidity in future periods:

the outcome of the renegotiation of our tariffs with the Argentine Government;

the uncertainty generated by the timing and outcome of the voluntary reorganization proceeding (concurso preventivo) filed by us on June 17, 2010 in an Argentine court; and

the macroeconomic situation in Argentina, including inflation, devaluation and unemployment.

In particular, our results of operations and financial condition are very sensitive to changes in the Peso exchange rate as our primary assets and revenues are denominated in Pesos while substantially all of our financial liabilities are denominated in U.S. Dollars or Euros.

In addition to these circumstances, changes in Argentina may have other unforeseen consequences that could negatively affect our results of operations and financial condition. We cannot assure you that other laws that negatively affect us will not be introduced.

Effects of the Agreement with Gas Producers 2007-2011

Intervention by the Secretariat of Internal Commerce

On July 6, 2007, an administrative proceeding was initiated by the Secretariat of Interior Commerce seeking to impose a temporary intervention on our activities arguing that we had violated the Law of Supply and Speculation Control No. 20,680, by interrupting the distribution of natural gas to certain of our industrial clients. The Secretariat eventually decided not to impose the administrative intervention.

Since the 2007 winter period, both the Secretariat of Interior Commerce and the Energy Secretariat increased their intervention in the operations of our business. Aiming to guarantee natural gas supply to non-interruptible customers, the interventions have focused on restrictions of the supply of natural gas to certain industrial and power plants customers. On May 12, 2008, the Energy Secretariat issued a note toCompañía Administradora del Mercado Mayorista Eléctrico S.A, ("CAMMESA"), the entity that administers Argentina's wholesale electricity market, authorizing CAMMESA to redirect natural gas volumes to a different power plant customer from the one contractually entitled to such volumes with the goal to allocate available natural gas volumes in the most efficient manner.

The intervention of the Secretariat of Interior Commerce and/or the Energy Secretariat could affect the supply to residential customers, industrial customers and power plant customers, altering the distribution system reliability and resulting in a decrease in our sales that could lead to a material adverse effect on our cash flow and results of operations.

Critical Accounting Policies and Estimates

In connection with the preparation of our consolidated financial statements, we have relied on estimates and assumptions derived from historical experience and various other factors that are reasonable and relevant. Although we review these estimates and assumptions in the ordinary course of our business, the portrayal of our financial condition and results of operations often requires management to make judgments regarding the effects of matters that are inherently uncertain with respect to the carrying value of our assets and liabilities. Actual results may differ from those estimated under different estimates, assumptions or conditions.

The assumptions most subject to judgment in our expected cash flows are:

Tariff increases: our forecasts have assumed gradual tariff increases between 2011 and 2018 that will reach tariff levels that are approximately 440% higher than the current tariffs in Argentine Pesos, and
Inflation rate: we have forecast steady levels consistent with those in force at the date of this annual report.
Exchange rate: we have forecast a 10% depreciation of the peso against the dollar

In order to provide an understanding about how management forms its judgments about future events, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions, we have included comments related to each critical accounting policy described as follows (see Note 3 to the Annual Consolidated Financial Statements):

revenue recognition and accounts receivable;

impairment of long-lived assets;

provision for allowances and contingencies;

other long-term receivables;

deferred income tax; and

minimum presumed income tax.

Revenue recognition and accounts receivable

Revenue is recognized on an accrual basis upon delivery to customers, which includes estimated amounts of gas delivered but not yet billed at the end of each year. The amounts effectively delivered have been estimated based upon the volumes of gas purchased and other historical data. Unbilled revenues as of December 31, 2010, 2009 and 2008 amounted to Ps. 31.8 million, Ps. 16.6 million and Ps. 31.1 million, respectively.

We are exposed to losses due to uncollectible accounts receivable. The allowance for doubtful accounts is based on our estimates for collections. While management uses the available information to make evaluations, future adjustments to the allowances may be necessary if future economic conditions differ substantially from the assumptions used in making the evaluations. The corresponding charge is included in selling expenses; no adjustment is made to sales revenue. To establish the allowance for doubtful accounts our management constantly evaluates the amount and characteristics of our account receivables including the age and financial condition of our customers. The allowance for doubtful accounts as of December 31, 2010, 2009 and 2008 amounted to Ps. 21.9 million, Ps 17.4 million and Ps 13.9 million, respectively.

Impairment of long-lived assets

Impairment Policy

As a matter of policy, we evaluate the carrying value of our long-lived assets in December of each year. In addition, we periodically evaluate the carrying value of our long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Based on the way we operate our business, the manner in which assets are used and how assets generate cash flows, we consider that we have only one independent identifiable cash flow generating group of assets, and therefore, test the group of assets for impairment as a whole.

Under Argentine GAAP, the carrying value of a long-lived asset is considered impaired when the expected cash flows, discounted and without interest cost, from such asset are less than the asset's carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Cash flows are discounted at a rate commensurate with the risk involved. In determining expected cash flows, assets are grouped at the lowest level for which cash flows are identifiable and largely independent of cash flows of other asset groups.

Under U.S. GAAP, we apply the provisions of ASC 360-10, "Impairment or Disposal of Long lived Assets" ("ASC 360-10"). As indicated, under ASC 360-10, the carrying value of a long-lived asset is considered impaired when the expected undiscounted cash flows from such asset are separately identifiable and less than the asset's carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. If alternative courses of action are expected, different cash flow scenarios are estimated using a probability-weighted approach, which considers the likelihood of each possible outcome.

We believe that our accounting policy related to the impairment of long-lived assets is a "critical accounting policy" because:

(1) it requires our management, in determining fair market value, to make estimates and assumptions (such as future revenues and cost of revenues) that are highly susceptible to change from period to period; and

(2) the impact that recognizing or reversing impairment would have on assets reported on our consolidated balance sheet as well as on the results of our operations could be material. Estimates about future revenues require significant judgment because actual revenues have fluctuated in the past and are expected to continue to do so, especially due to the pending tariff renegotiation process.

Impairment Test for Fiscal Year Ended December 31, 2010

For the fiscal year ended December 31, 2010, we identified impairment indicators and performed an impairment test on our property, plant and equipment in accordance with Argentine GAAP. Pursuant to such test, we compared the net carrying amounts of our long-lived assets to the estimated discounted future cash flows expected to be generated by such assets, estimated using a probability-weighted approach. As the estimated discounted cash flows were higher than the carrying amount of such fixed assets, we determined that the assets were not impaired.

In addition, for the fiscal year ended December 31, 2010, we identified impairment indicators and performed an impairment test on our property, plant and equipment based on the guidance in ASC Topic 360-10. Pursuant to such test, we compared the net carrying amounts of our long-lived assets to the estimated undiscounted future cash flows expected to be generated by such assets and determined that the assets were not impaired. With respect to the material assumptions used in performing such impairment test, taking into account (i) the nature, timing and extent of our tariff renegotiation process with the Argentine National Government, (ii) the erosion of our operating profit resulting from increases in our operating costs (which in turn are the result of inflationary pressures and cannot be recovered through tariff adjustments due to the current tariff freeze), (iii) an analysis of how actual results have compared to our projections for prior periods, (iv) the recent experience of the other gas distribution company in the Buenos Aires metropolitan area (the principal gas market in Argentina), Gas Natural Ban, who had its renegotiation agreement approved by the Argentine Executive Branch on April 10, 2006 (which was subsequently implemented by ENARGAS on April 9, 2007 and October 10, 2008) and has now begun its full rate tariff review and (v) the status of our current negotiations with the Argentine National Government, we assembled three different cash flow scenarios using a probability-weighted approach which considered the likelihood of each possible outcome in accordance with ASC Topic 360-10-35. As further described below, each of these scenarios contemplates different assumptions and we assigned a probability of occurrence to each cash flow projection based on current, factual information. Additionally, all cash flow projections have been prepared taking into consideration the remaining term of our gas license, which does not exceed the residual useful life of our long-lived assets.

Below find a summary of the material assumptions of the different cash flow scenarios as well as the probability assigned to each:

Scenario 1: The principal assumption in this scenario is that we would successful comply with a court-ordered reorganization plan, including the refinancing of all of our outstanding debt obligations on acceptable terms. This scenario further assumes we would reach an acceptable agreement with the Argentine National Government resulting in gradual tariff increases.

Within this scenario, we considered three different possible cash flows associated with the magnitude of the tariff increases expected as described below. We assigned a probability of occurrence to each of the three possible cash flows in order to obtain the probability-weighted undiscounted cash flow for this scenario.

Base Case: This cash flow assumes that we would reach tariff levels similar to those currently being applied by Gas Natural Ban and then gradual tariff increases to reach, by 2018, tariff levels equivalent in U.S. Dollars to those in force in 2001 by MetroGAS in Argentina before the pesification.

Pessimistic Case: This cash flow assumes that we would only reach tariff levels similar to those currently being applied by Gas Natural Ban.

Optimistic Case: This cash flow assumes that we would gradually reach, by 2018, tariff levels comparable to those in South America in 2001.

We assigned a probability of occurrence of 90% to this cash flow scenario based on: (a) the execution of the Transition Agreement; (b) the recent experiences of another gas distribution company in the Buenos Aires metropolitan area (the principal gas market in Argentina), Gas Natural Ban,who, as noted above, not only has executed a renegotiation agreement with the Argentine National Government but also had its new tariff schedules approved by ENARGAS, which enable it to invoice its distribution services under the new tariffs; (c) our current regulatory framework, which includes the Gas Act and the above-mentioned rules relating to gas tariffs; and (d) the renegotiation agreements signed by all other gas distribution companies, except for us and one other gas distribution company, which agreements permit the parties thereto to begin a full rate tariff review and establish (i) a semi-annual tariff review in order to adjust tariffs to the general cost index variation whenever such index varies by more than 5% and (ii) a five-year tariff review similar to the five year tariff review contemplated by our gas license (see Item 4 "Information on the Company - Business Overview - Regulatory Framework - ENARGAS - Tariffs").

Scenario 2: The principal assumption in this scenario is that we are not able comply with a court-ordered reorganization plan, including failing to refinance all of our outstanding debt obligations on acceptable terms. Instead, this scenario assumes the declaration of bankruptcy against us and the revocation of our gas license. This scenario further assumes we are not able to reach an acceptable agreement with the Argentine National Government resulting in no tariff increases.

We assigned a probability of occurrence of 10% to this cash flow scenario based on (a) our 11-year experience with past delays in our tariff renegotiation process with the Argentine National Government and (b) the fact that, prior to the Argentine Executive Branch executing a renegotiation agreement with us, the Argentine Executive Branch required our majority shareholder, the BG Group, to suspend any and all claims or actions brought by it against the Argentine Government relating to Law No. 25,561 of January 2002, which, among other things, froze tariffs.

Taking into account the two scenarios outlined above, based on the probability-weighted undiscounted cash flows method, we determined that our undiscounted expected cash flows exceeded their net carrying value by approximately 200%. Therefore, we did not proceed to step two of the ASC Topic 360-10 impairment analysis and concluded that our property, plant and equipment were not impaired.

Impairment Charges and Reversals

Under Argentine GAAP, a previously recognized loss should only be reversed when there is a subsequent change in estimates used to compute the fair market value of the asset. In that event, the new carrying amount of the asset should be the lower of its fair market value or the net carrying amount the asset would have had if no impairment had been recognized. Both the impairment charge and the impairment reversal are recognized in earnings. U.S. GAAP prohibits the reversal of a previously recognized impairment charge.

As of December 31 2010, 2009 and 2008, no impairment losses were recognized under both U.S. GAAP and Argentine GAAP, as both the undiscounted and discounted cash flows of our long-lived assets were higher than the carrying amount of such assets.

Provision for allowances and contingencies

We have certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings. We accrue liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, our estimate of the outcomes of these matters and lawyers' experience in contesting, litigating and settling other matters. As the scope of the liabilities becomes better defined, there may be changes in the estimates of future costs, which could have a material adverse effect on our future results of operations and financial condition or liquidity. The contingencies reserve for executive proceedings as of December 31, 2010, 2009 and 2008, amounted to Ps. 21.8 million, Ps. 14.3 million and Ps. 9.9 million, respectively. The contingencies reserve for the GCBA turnover tax as of December 31, 2010, 2009 and 2008, amounted to Ps. 16.7 million, Ps. 7.0 million and Ps. 5.7 million, respectively. The contingencies reserve for rates and charges as of December 31, 2010, 2009 and 2008 amounted to Ps. 22.3 million, Ps. 21.3 million and Ps. 20.2 million, respectively. The contingencies reserve for GCBA fines as of December 31, 2010 and 2009 amounted to Ps. 2.4 million and Ps. 0.8 million, respectively. The contingencies reserve for interpretive disagreements with regulatory authorities as of December 31, 2010, 2009 and 2008, amounted to Ps. 9.2 million, Ps. 22.7 million and Ps. 16.6 million, respectively. The contingencies reserve for other matters as of December 31, 2010, 2009 and 2008, amounted to Ps. 6.7 million, Ps. 4.7 million and Ps. 9.9 million, respectively. Allowance for disposal of fixed assets amounted to Ps. 8.8 million, Ps. 7.5 million and Ps. 8.9 million as of December 31, 2010, 2009 and 2008, respectively.

Other long-term receivables

We have recorded an asset of Ps. 98.1 million, Ps. 113.2 million and Ps. 99.1 million under the line item other non current receivables at December 31, 2010, 2009 and 2008, respectively, for the value of the discounted credits related to the Inspection Rate and Occupancy Rate, described in Item 8: Financial Information - Legal Proceedings, as we believe we have the right to pass through (in the tariffs we charge our customers) the amounts paid with respect to those based on: (a) as stipulated by the gas industry regulatory framework, Law No. 24,076 (Sect 41) and Decree No. 2,255/92 (Sect 9.6.2), establishing that cost variations resulting from changes in tax standards shall be reallocated to tariffs and (b) in May 2005, in response to a communicationfiled by us, the Ministry of Economy's Legal Affairs Department commented favorably on the pass-through of these costs to customers through tariffs and filed its comments with ENARGAS to be considered when rendering a final decision.

Under Argentine GAAP, the amounts to be recovered through tariffs included in the line item other long-term receivables, were valued on the basis of the best possible estimates of the amounts to be received, discounted using a rate that reflects the time value of the money, and the specific risks of the receivables. However, we can give no assurances as to when we will be able to pass these costs to our customers through tariffs.

Under U.S. GAAP, we recorded the reversal of this regulatory asset, considering the provisions contained in ASC 980 "Regulated operations" that, according to our assessment are not applicable to us.

Deferred income tax

We recorded substantial losses in 2002, the year of the initial onset of the economic crisis in Argentina, and such losses resulted in a tax loss carryforward. The ultimate realization of the tax loss carryforward is dependent upon the generation of future taxable income during the periods in which the tax loss carryforward becomes recoverable. We are required to periodically evaluate the recoverability of the tax loss carryforward. This evaluation is made based on internal projections, which are routinely updated to reflect more recent trends in our results of operations.

In addition, under U.S. GAAP, there are more stringent criteria with respect to the assessment of recoverability of deferred tax assets. As described in Note 18 to our Annual Consolidated Financial Statements, the use of tax projections is not allowed in certain circumstances. Consequently, as of December 31, 2010 and 2009, under U.S. GAAP, we recorded a valuation allowance of Ps. 2.5 and Ps. 79.1 million, respectively against our tax loss carryforwards and certain of our other deferred tax assets. However, under Argentine GAAP, we have not recorded a valuation allowance. Under both U.S. and Argentine GAAP, as of December 31, 2008, based on financial information, we were uncertain whether we would fully recover our tax loss carryforward through future taxable income; consequently, we recorded a valuation allowance of Ps. 23.3 million.

Minimum presumed income tax

We have also recorded an asset (net of its fair value discount) of Ps. 101.9 million, Ps. 87.4 million and Ps. 75.6 million at December 31, 2010, 2009 and 2008, respectively for the value of our tax credit related to our tax on minimum presumed income. This tax is supplementary to our income tax liability. The tax is calculated by applying the effective tax rate of 1% on the tax basis for certain assets. Our final tax liability will be the higher of income tax or minimum presumed income tax. However, if the tax on minimum presumed income exceeds income tax during any fiscal year, such excess may be computed as a prepayment of any income tax excess over the tax on minimum presumed income that may arise during the next ten fiscal years.

Under Argentine GAAP, the value of any such minimum presumed income tax credit is based on its present value, which is calculated as the discounted value of amounts expected to be collected or paid, as applicable. Accordingly, we recorded Ps. 1.4 million, Ps. 1.4 million and Ps. 1.7 million as the discount value of our minimum presumed income tax credits for the years ended December 31, 2010, 2009 and 2008, respectively. For U.S. GAAP purposes, those adjustments were reversed.

Additionally, under Argentine GAAP, based on our tax projections and the ten-year legal availability of the credit, a valuation allowance for our minimum presumed income tax credits, which amounts to Ps. 21.1 million as of December 31, 2010 and 2009, was recognized. Under U.S. GAAP, as described in Note 18 to our Annual Consolidated Financial Statements, the use of tax projections is not allowed in certain circumstances. Consequently, as of December 31, 2010 and 2009, we recorded a valuation allowance of Ps. 102.2 million and Ps. 88.9 million for our minimum presumed income tax credits. See Item 18: "Financial Statements."

Under both Argentine GAAP and U.S. GAAP, no valuation allowance was recognized as of December 31, 2008 for our minimum presumed income tax credits.

Effect of new accounting pronouncements

On December 29, 2009, the CNV issued Resolution No. 562, adopting FACPCE Technical Resolution No. 26: "Professional Accounting Standards: Adoption of International Financial Reporting Standards ("IFRS") of the International Accounting Standards Board ("IASB")" beginning with fiscal year ended December 31, 2012. In summary, this resolution states that:

All entities within the public offering regime of Law No. 17,811 are required to apply IFRS, as issued by the IASB, when preparing their financial statements. All other entities not covered or excluded therefrom may apply IFRS or other professional accounting standards issued by the FACPCE now or in the future.

Adoption of the IFRS is effective for financial statements beginning with fiscal year ended December 31, 2012 and for interim financial statements prepared during that year. Additionally, entities required to apply IFRS must prepare a note in their annual financial statements for the fiscal year ended December 31, 2011 detailing the expected impact of IFRS on their financial results.

The transition to IFRS will require us to make accounting, financial and operational changes. In this respect, on April 22, 2010, our Board of Directors approved our IFRS implementation plan. We are currently concluding the evaluation of our IFRS implementation stage.

Therefore, as of the date of this annual report, although our IFRS implementation plan has progressed according to schedule, we cannot determine what will be the final impact of our adoption of IFRS and cannot guarantee its adoption will not have a negative effect on us. If the effects do prove to be negative, our financial position, results of operations and shareholder's equity could be adversely affected.

Operating Results

The following review of our results of operations and financial condition should be read in conjunction with our Annual Consolidated Financial Statements and with our Selected Consolidated Financial Data included in Item 3, "Key Information." Our Annual Consolidated Financial Statements have been prepared in accordance with Argentine GAAP. Accordingly, our Annual Consolidated Financial Statements reflect the effects of inflation through August 31, 1995. As from that date and according to Argentine GAAP and CNV requirements, the restatement for inflation was discontinued through December 31, 2001. In accordance with CNV General Resolution No. 415 dated July 25, 2002, financial statements are to be expressed in Pesos and restated for inflation since January 1, 2002. To this end, Resolution No. 6 of the Argentine Federation of Professional Councils in Economic Sciences has been adopted to provide that accounting measurements restated as of August 31, 1995, as well as those corresponding to the period from that date to December 31, 2001, will be considered restated as at the latter date.

On March 25, 2003, the National Executive Power issued Decree No. 664, which establishes that financial statements for fiscal years/periods ending after that date should be stated in nominal Pesos. Consequently, according to Resolution No. 441 issued by the CNV, we discontinued the restatement for inflation of our consolidated financial statements effective March 1, 2003.

Our Annual Consolidated Financial Statements have been prepared assuming that we will continue as a going concern. Our independent auditors, pwc, issued a report dated April 28, 2011 on our financial statements as of and for the years ended December 31, 2010 and 2009, which contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern. Note 2 of the financial statements discloses that the suspension of the original regime for tariff adjustments and the inability to generate sufficient cash flows to pay our financial debt obligations led us to file a petition for a voluntary reorganization proceeding (concurso preventivo) in an Argentine court on June 17, 2010. This reorganization filing generated an event of default under the outstanding debt obligations. Pursuant to the terms of our outstanding debt obligations, this default resulted in the automatic acceleration of our outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on our outstanding debt obligations. As of the date of this annual report, it is not possible to predict the outcome of this reorganization proceeding. These circumstances raise substantial doubt about our ability to continue as a going concern. However, our financial statements as of and for the year ended December 31, 2010 do not include any adjustments or reclassifications that might result from the outcome of this uncertainty. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Us-Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors have issued an opinion that contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern." See Item 18: "Financial Statements."

Results of Operations for the Years Ended December 31, 2010 and 2009

Our results of operations vary significantly from season to season, with our sales and operating income being significantly higher during the winter months (March through September). The table below sets forth our sales, gross profit, operating income, income (loss) before income tax and net (loss) income for each quarter of 2010:

	Three Months Ended
	March 31, 2010	June 30, 2010	September 30, 2010	December 31, 2010	Total
	(in millions of Pesos)
	(unaudited)
Gross Sales	225.7	293.3	351.1	252.2	1,122.3
Gross profit	65.2	90.0	95.9	62.0	313.1
Operating income (loss)	17.5	25.5	19.6	(6.1)	56.5
Income (loss) before income tax	(14.3)	(31.7)	(2.7)	(35.8)	(84.5)
Net income (loss)	(15.1)	(23.3)	(4.9)	(28.4)	(71.7)

Gross Sales

Our consolidated gross sales for the year ended December 31, 2010 increased by 4.5%, to Ps. 1,122.3 million compared to Ps. 1,074.2 million in 2009. The increase in sales during 2010 resulted primarily from the increase in MetroENERGÍA's sales traded on its own behalf from Ps. 184.4 million in 2009 to Ps. 221.2 million in 2010.

Although volumes delivered to residential customers increased by 1.2%, sales thereto decreased by 1.4% to Ps. 515.3 million compared to Ps. 522.5 million in 2009 mainly due to a decrease in average prices charged, which in turn resulted from the increase in volumes delivered to residential customers in subcategories with lower tariffs.

Our sales of natural gas to industrial, commercial and governmental customers increased by 9.3% to Ps. 89.0 million in 2010 from Ps. 81.4 million during 2009 mainly due to a 2.7% increase in gas volumes delivered thereto. Sales of transportation and distribution services to this same customer category increased by 9.7% from Ps. 59.2 million in 2009 to Ps. 64.9 million during the year ended December 31, 2010, as a result of the increase in average prices, which was only partially offset by a 4.7% decrease in volumes delivered.

Additionally, sales of transportation and distribution service to power plants increased by 9.2% to Ps. 88.3 million in 2010 from Ps. 80.8 million during 2009, due to an increase in average prices partially offset by an 8.3% decrease in gas volumes delivered.

Sales of transportation and distribution service to CNG decreased by 2.9% from Ps. 37.8 million during 2009 to Ps. 36.7 million during 2010, mainly due to a 1.1% decrease in volumes delivered and a decrease in the amounts charged for reserved capacity.

Processed natural gas sales remain constant during the year ended December 31, 2010 compared to the previous year, primarily as a result of the 2.2% decrease in gas volumes delivered partially offset by an increase in the average price of processed natural gas.

MetroENERGÍA's gas and transportation sales on its own behalf increased by 20.0% from Ps. 184.4 million during 2009 to Ps. 221.2 million during 2010, mainly because of a 28.1% increase in volumes delivered and an increase in the average price of natural gas. Gas volumes delivered by MetroENERGÍA corresponding to sales on its own behalf amounted to 768.5 MMCM during 2010 compared to 600.1 MMCM during 2009.

Commission for operations carried out by MetroENERGÌA on behalf of third parties decreased to Ps. 12.1 million during 2010 from Ps. 15.9 million during 2009, mainly because of the increase in the average price of natural gas.

The table below sets forth our sales by customer category for the years ended December 31, 2010 and 2009, and the percentage of sales represented by sales to each class of customer:

	Sales
	Year Ended December 31, 2010	% of Sales	Year Ended December 31, 2009	% of Sales
	(in millions of Pesos, except percentages)

Natural gas and services
Residential	515.3	45.9	522.5	48.6
Industrial, commercial and governmental	89.0	7.9	81.4	7.6
Subtotal	604.3	53.8	603.9	56.2
Transportation and distribution Service only
Power plants	88.3	7.9	80.8	7.5
Industrial	64.9	5.8	59.2	5.5
Compressed natural gas	36.6	3.3	37.8	3.5
Subtotal	189.9	17.0	177.8	16.6
Processed natural gas	48.8	4.3	48.8	4.5
Other gas sales and transportation and distribution services	46.1	4.1	43.5	4.0

MetroENERGÍA
Sales on their own behalf	221.2	19.7	184.4	17.2
Selling commission	12.1	1.1	15.9	1.5
Total	1,122.3	100.0	1,074.2	100.0

The table below sets forth our delivered volume of natural gas by customer category for the years ended December 31, 2010 and 2009 and the percentage of total delivered volume of natural gas represented by the volume delivered to each category:

	Delivered Volume
	Year Ended December 31, 2010			Year Ended December 31, 2009
	MMCM	MMCF	% of Volume of Gas Delivered	MMCM	MMCF	% of Volume of Gas Delivered
Gas and services
Residential	1,940.7	68,533.8	24.6	1,917.9	67,729.7	23.3
Industrial, commercial and governmental	469.0	16,563.7	6.0	456.8	16,131.7	5.5
Subtotal	2,409.7	85,097.5	30.6	2,374.70	83,861.3	28.8
Transportation and distribution services only
Power plants	3,373.0	119,116.9	42.8	3,678.5	129,904.4	44.6
Industrial	834.6	29,473.7	10.6	876.0	30,935.5	10.6
Compressed natural gas	553.6	19,551.1	7.0	559.6	19,762.0	6.8
Subtotal	4,761.2	168,141.7	60.4	5,114.1	180,601.9	62.0
Processed natural gas	141.3	4,990.0	1.8	138.3	4,884.0	1.7
Other gas sales and transportation and distribution services	570.6	20,149.5	7.2	618.5	21,842.0	7.5
Total delivered volume by MetroGAS	7,882.8	278,378.7	100.0	8,245.6	291,189.2	100.0
Total delivered volume by MetroENERGÍA on own behalf	768.5	27,138.9	100.0	600.1	21,192.2	100.0

Operating Costs

Our operating costs increased by 5.1% to Ps. 803.2 million during 2010 from Ps. 769.6 million in 2009. This increase was primarily as a result of (i) an increase in our gas and transportation costs, (ii) an increase in our payroll and social security contributions, and (iii) an increase in repair and maintenance costs.

Our purchases of natural gas increased by 4.4% from Ps. 387.7 million during 2009 to Ps. 404.8 million during 2010 due toan increase in purchased gas volumes from MetroENERGÍA. During 2010, 3,002.6 MMCM were acquired by us and 533.7 MMCM were acquired by MetroENERGÍA, representing an increase of 2.8% compared to the gas volumes purchased in 2009. The increase in purchased gas volumes from MetroENERGÍA is due to higher sales in 2010 compared to 2009, with an increase of 8.4% in gas volumes delivered.

Gas transportation costs increased by 2.0% during the year ended December 31, 2010 compared to the previous year, due to the increase in interruptible transportation costs, mainly as a consequence of an increase in transportation sales from MetroENERGÍA, partially offset by a decrease in average prices.

During the year ended December 31, 2010 and 2009, the Company capitalized Ps. 6.3 million and Ps. 5.0 million, respectively, corresponding to the portion of operating costs attributable to the planning, execution and control of investments in fixed assets.

The table below sets forth our operating costs by class of cost for 2010 and 2009 and the percentage of our total operating costs represented by each class of operating cost:

	Operating Costs
	Year Ended December 31, 2010	% of Total Operating Cost	Year Ended December 31, 2009	% of Total Operating Cost
	(in millions of Pesos, except percentages)
Gas supply	404.8	50.0	387.7	50.4
Gas transportation service	218.1	27.0	213.9	27.8
Fixed assets depreciation	69.0	8.5	67.4	8.7
Payroll and social security contributions	64.9	8.0	50.8	6.6
Operations and maintenance	30.6	3.8	22.3	2.9
Sundry materials	4.4	0.5	4.5	0.6
Fees for sundry services	16.2	2.0	15.4	2.0
Other operating costs	7.6	0.9	12.6	1.6
Capitalization of operating costs (i)	(6.4)	(0.7)	(5.0)	(0.6)
Total	809.2	100.0	769.6	100.0

(i) Note: Capitalization of operating costs includes direct costs and applicable overhead.

Administrative Expenses

Our administrative expenses increased by 26.8% to Ps. 123.8 million in 2010 from Ps. 97.7 million in 2009. . This increase was mainly due to the increase in payroll and social contributions, for a salary increase of 28.6% granted to employees in 2010, in fees for professional services for the provision of the reorganization expenses in 2010, and the tax, rates and surcharges for the increases in verification and control and reorganization levies in 2010 compared to levy charges expenses in 2009.

The table below sets forth our administrative expenses by class of expense for 2010 and 2009 and the percentage of our administrative expenses represented by each class of administrative expense:

	Administrative Expenses
	Year Ended December 31, 2010	% of Total Administrative Expenses	Year Ended December 31, 2009	% of Total Administrative Expenses
	(in millions of Pesos, except percentages)
Payroll and social security contributions	55.9	45.0	44.5	45.5
Taxes, rates and contributions	16.1	13.0	10.8	11.1
Fees for professional services	12.9	10.4	6.2	6.3
Fees for sundry services	1.0	0.8	1.4	1.4
Insurance	3.5	2.8	2.9	3.0
Fixed assets depreciation	5.5	4.4	3.9	4.0
Fixed assets maintenance	10.5	8.5	10.4	10.6
Contingency provision	9.5	7.7	10.4	10.6
Other administrative expenses	9.2	7.4	7.2	7.5
Total	124.1	100.0	97.7	100.0

Selling Expenses

Our selling expenses increased by 17.7% to Ps. 132.8 million during 2010, from Ps. 112.9 million during 2009, mainly due to the increase in payroll and social contributions for a salary increase of 28.6% granted to employees in 2010, in tax, rates and surcharges for an increase in gross receipt tax, consequence of gross sales increase in 2010 compared to 2009, in fees for sundry services due to an increase in metering and billing procedure costs, and in postage, telephone and fax expenses, due to an increase in cost of invoice distribution services, partially offset by a decrease in the allowance for doubtful accounts.

The table below sets forth our selling expenses by class of expense for 2010 and 2009 and the percentage of our selling expenses represented by each class of selling expense:

	Selling Expenses
	Year Ended December 31, 2010	% of Total Selling Expenses	Year Ended December 31, 2009	% of Total Selling Expenses
	Year Ended December 31, 2010	% of Total Selling Expenses	Year Ended December 31, 2009	% of Total Selling Expenses
	(in millions of Pesos, except percentages)
Payroll and social security contributions	50.3	37.9	40.7	36.0
Doubtful accounts	7.0	5.3	8.2	7.3
Fees for sundry services	13.7	10.3	11.0	9.7
Advertising and publicity	1.1	0.8	2.0	1.8
Bank expenses and commissions	6.5	4.9	6.2	5.5
Taxes, rates and contributions	42.1	31.7	34.7	30.7
Other selling expenses	12.1	9.1	10.1	9.0
Total	132.8	100.0	112.9	100.0

Financing and Holding Results

During the year ended December 31, 2010 a financial and holding loss of Ps. 146.7 million was recorded compared to a loss of Ps. 170.8 million recorded in the previous year. Such variation in financial and holding results was mainly due to the decrease of Ps. 52.2 million of the exchange loss registered in the year ended December 31, 2010, as a consequence of the decrease in the exchange rate over financial debts and the decrease of Ps. 36.6 million in interest charged on financial operations compared to the previous year, partially offset by the increase of Ps. 32.8 million in the discount of long term other receivables as a consequence of the changes in the assumptions used in the present value estimation based on the delay in the renegotiation process, and the reversal of the discount of long term financial debt result registered in the year ended December 31, 2010 of Ps. 29.5 million as a consequence of the Company's filing of a petition for voluntary reorganization (concurso preventivo).

Other Income, Net

Other income net for the year ended December 31, 2010 increased by Ps. 6.0 million compared to the gain of Ps. 8.0 million recorded in the previous year. This increase in other income, net was largely a result of the reversal in 2009 of certain liabilities which had been recorded by us but have not been claimed by providers and thus have been written off, which write off was not replicated in 2010.

Income Tax

During the year ended December 31, 2010, we had a Ps. 12.8 million income tax gain compared to a loss of Ps. 9.4 million in the previous year. This gain was mainly due to the reversal of MetroGAS' deferred tax liabilities from the reversal of the discount of long term financial debt result in 2010, partially offset by a higher charge generated by MetroENERGÍA as of December 2010 compared to the present year.

Net loss

Our net loss totaled Ps. 71.7 million during 2010, compared to Ps. 78.3 million in 2009. This decrease in our net loss was mainly a result of the decrease in our financing and holding loss and the gain registered in our income tax results, partially offset by a decrease in our operating income.

Results of Operations for the Years Ended December 31, 2009 and 2008

	Three Months Ended
	March 31, 2009	June 30, 2009	September 30, 2009	December 31, 2009	Total
	(in millions of Pesos)
	(unaudited)
Gross Sales	201.9	301.6	354.8	215.9	1,074.2
Gross profit	59.6	101.7	105.4	37.9	304.6
Operating income (loss)	17.8	46.2	48.9	(18.8)	94.1
Income (loss) before income tax	(56.8)	2.3	8.9	(23.4)	(69.0)
Net income (loss)	(39.7)	0.1	1.3	(40.0)	(78.3)

Gross Sales

Our consolidated gross sales for the year ended December 31, 2009 increased by 19.2%, to Ps. 1,074.2 million compared to Ps. 901.6 million in 2008.

The increase in sales during 2009 was mainly attributable to MetroGAS' increase in sales to residential customers from Ps. 415.5 million in 2008 to Ps. 522.5 million in 2009 and MetroENERGÍA's total sales increase of Ps. 76.9 million from 2008 to 2009.

Although volumes delivered to residential customers increased by only 2.2%, sales thereto increased by 25.8% to Ps. 522.5 million compared to Ps. 415.5 million in 2008 mainly due to (i) an increase in the tariff paid by our residential customers as a result of a seasonal tariff increase to reflect our increased costs of purchasing gas; and (ii) an increase in our number of residential customers.

Our sales of natural gas to industrial, commercial and governmental customers decreased by 11.4% to Ps. 81.4 million in 2009 from Ps. 92.0 million during 2008 mainly due to a 16.0% decrease in gas volumes delivered thereto. Sales of transportation and distribution services to this same customer category decreased by 12.7% from Ps. 67.8 million in 2008 to Ps. 59.2 million during the year ended December 31, 2009, as a result of the 10.3% decrease in volumes delivered.

Additionally, sales of transportation and distribution service to power plants increased by 1.9% from Ps. 79.3 million during the year ended December 31, 2008 to Ps. 80.8 million during the year ended December 31, 2009, due to an 0.8% increase in gas volumes delivered.

Sales of transportation and distribution service to CNG decreased by 5.9% from Ps. 40.1 million during 2008 to Ps. 37.8 million during 2009, mainly due to a 4.2% decrease in volumes delivered and a decrease in the amounts charged for the reserved capacity.

Processed natural gas sales increased by 32.2% to Ps. 48.8 million in 2009 from the Ps. 36.9 million recorded during 2008, primarily as a result of the 30.1% increase in gas volumes delivered and an increase in the average price of processed natural gas.

MetroENERGÍA's gas and transportation sales on its own behalf increased by 59.4% from Ps. 115.6 million during 2008 to Ps. 184.4 million during 2009, mainly because of a 27.1% increase in volumes delivered and an increase in the average price of natural gas. Gas volumes delivered by MetroENERGÍA corresponding to sales on its own behalf amounted to 600.1 MMCM during 2009 compared to 472.2 MMCM during 2008.

Commission for operations carried out by MetroENERGÌA on behalf of third parties increased to Ps. 15.9 million during 2009 from Ps. 7.7 million during 2008, mainly because of the increase in the average price of natural gas.

The table below sets forth our sales by customer category for the years ended December 31, 2009 and 2008, and the percentage of sales represented by sales to each class of customer:

	Sales
	Year Ended December 31, 2009	% of Sales	Year Ended December 31, 2008	% of Sales
	(in millions of Pesos, except percentages)

Natural gas and services
Residential	522.5	48.6	415.5	46.1
Industrial, commercial and governmental	81.4	7.6	92.0	10.2
Subtotal	603.9	56.2	507.5	56.3
Transportation and distribution Service only
Power plants	80.8	7.5	79.3	8.8
Industrial	59.2	5.5	67.8	7.5
Compressed natural gas	37.8	3.5	40.1	4.5
Subtotal	177.8	16.6	187.2	20.8
Processed natural gas	48.8	4.5	36.9	4.1
Other gas sales and transportation and distribution services	43.5	4.0	46.7	5.2

MetroENERGÍA
Sales on their own behalf	184.4	17.2	115.6	12.8
Selling commission	15.9	1.5	7.7	0.8
Total	1,074.2	100.0	901.6	100.0

The table below sets forth our delivered volume of natural gas by customer category for the years ended December 31, 2009 and 2008 and the percentage of total delivered volume of natural gas represented by the volume delivered to each category:

	Delivered Volume
	Year Ended December 31, 2009			Year Ended December 31, 2008
	MMCM	MMCF	% of Volume of Gas Delivered	MMCM	MMCF	% of Volume of Gas Delivered
Gas and services
Residential	1,917.9	67,729.7	23.3	1,877.1	66,288.8	22.5
Industrial, commercial and governmental	456.8	16,131.7	5.5	544.0	19,211.1	6.5
Subtotal	2,374.70	83,861.3	28.8	2,421.1	85,499.9	29.0
Transportation and distribution services only
Power plants	3,678.5	129,904.4	44.6	3,651.1	128,936.8	43.7
Industrial	876.0	30,935.5	10.6	976.1	34,470.5	11.7
Compressed natural gas	559.6	19,762.0	6.8	584.4	20,637.8	7.0
Subtotal	5,114.10	180,601.9	62.0	5,211.6	184,045.1	62.4
Processed natural gas	138.3	4,884.0	1.7	106.3	3,753.9	1.3
Other gas sales and transportation and distribution services	618.5	21,842.0	7.5	615.7	21,743.1	7.3
Total delivered volume by MetroGAS	8,245.6	291,189.2	100.0	8,354.7	295,042.0	100.0
Total delivered volume by MetroENERGÍA on own behalf	600.1	21,192.2	100.0	472.2	16,675.5	100.0

Operating Costs

Our operating costs increased by 25.6% to Ps. 769.6 million during 2009 from Ps. 613.0 million in 2008. This increase was primarily as a result of (i) an increase in our gas purchase costs, (ii) an increase in our payroll and social security contributions, and (iii) the reversal of penalties owed to power plants recorded in the first quarter of 2008, partially offset by the decrease in technical operator's fees.

Our purchases of natural gas increased by 50.7% from Ps. 257.2 million during 2008 to Ps. 387.7 million during 2009 due to an increase in gas prices at wellhead. During 2009, 2,948.4 MMCM were acquired by us and 492.5 MMCM were acquired by MetroENERGÍA, representing a 0.5% decrease compared to the gas volumes purchased in 2008.

Gas transportation costs increased by 2.3% during the year ended December 31, 2009 compared to the previous year, due to the increase in interruptible transportation costs.

During the year ended December 31, 2009 and 2008, the Company capitalized Ps. 5.0 million and Ps. 3.4 million, respectively, corresponding to the portion of operating costs attributable to the planning, execution and control of investments in fixed assets.

The table below sets forth our operating costs by class of cost for 2009 and 2008 and the percentage of our total operating costs represented by each class of operating cost:

	Operating Costs
	Year Ended December 31, 2009	% of Total Operating Cost	Year Ended December 31, 2008	% of Total Operating Cost
	(in millions of Pesos, except percentages)
Gas supply	387.7	50.4	257.2	42.0
Gas transportation service	213.9	27.8	209.2	34.1
Fixed assets depreciation	67.4	8.7	65.4	10.7
Payroll and social security contributions	50.8	6.6	43.0	7.0
Operations and maintenance	22.3	2.9	19.5	3.2
Technical operator's fee	-	-	9.0	1.5
Sundry materials	4.5	0.6	3.8	0.6
Fees for sundry services	15.4	2.0	10.0	1.6
Other operating costs	12.6	1.6	(0.9)	(0.1)
Capitalization of operating costs (i)	(5.0)	(0.6)	(3.4)	(0.6)
Total	769.6	100.0	613.0	100.0

(i) Note: Capitalization of operating costs includes direct costs and applicable overhead.

Administrative Expenses

Our administrative expenses increased by 17.6% to Ps. 97.7 million in 2009 from Ps. 83.0 million in 2008. This increase was mainly due to higher payroll and social security contributions, system maintenance expenses, tax and rates and surcharges and fees for professional services, partially offset by lower costs associated with sundry services and a decrease in our contingency provision.

The table below sets forth our administrative expenses by class of expense for 2009 and 2008 and the percentage of our administrative expenses represented by each class of administrative expense:

	Administrative Expenses
	Year Ended December 31, 2009	% of Total Administrative Expenses	Year Ended December 31, 2008	% of Total Administrative Expenses
	(in millions of Pesos, except percentages)
Payroll and social security contributions	44.5	45.5	38.4	46.3
Taxes, rates and contributions	10.8	11.1	7.1	8.6
Fees for professional services	6.2	6.3	3.7	4.5
Fees for sundry services	1.4	1.4	2.4	2.9
Insurance	2.9	3.0	2.3	2.8
Fixed assets depreciation	3.9	4.0	3.7	4.5
Fixed assets maintenance	10.4	10.6	6.6	8.0
Contingency provision	10.4	10.6	12.7	15.3
Other administrative expenses	7.2	7.5	6.10	7.1
Total	97.7	100.0	83.0	100.0

Selling Expenses

Our selling expenses increased by 27.8% to Ps. 112.9 million during 2009, from Ps. 88.3 million during 2008, mainly due to the increase in the allowance for doubtful accounts, in payroll and social security contributions, in tax, rates and surcharges, in postage, telephone and fax expenses and in fees for sundry services.

The table below sets forth our selling expenses by class of expense for 2009 and 2008 and the percentage of our selling expenses represented by each class of selling expense:

	Selling Expenses
	Year Ended December 31, 2009	% of Total Selling Expenses	Year Ended December 31, 2008	% of Total Selling Expenses
	Year Ended December 31, 2009	% of Total Selling Expenses	Year Ended December 31, 2008	% of Total Selling Expenses
	(in millions of Pesos, except percentages)
Payroll and social security contributions	40.7	36.0	34.7	39.3
Doubtful accounts	8.2	7.3	1.2	1.4
Fees for sundry services	11.0	9.7	9.4	10.6
Advertising and publicity	2.0	1.8	1.0	1.1
Bank expenses and commissions	6.2	5.5	5.4	6.1
Taxes, rates and contributions	34.7	30.7	29.8	33.7
Other selling expenses	10.1	9.0	6.8	7.8
Total	112.9	100.0	88.3	100.0

Financing and Holding Results

During the year ended December 31, 2009 a financial and holding loss of Ps. 170.8 million was recorded compared to a loss of Ps. 130.1 million recorded in the previous year. The variation in our financial and holding results was mainly due to interest and exchange loss registered in the year ended December 31, 2009, as a result of the effect of a decrease in the value of the Peso on our foreign currency denominated debt.

Other Income, Net

Other income net for the year ended December 31, 2009 increased by Ps. 8.1 million compared to the gain of Ps. 1.4 million recorded in the previous year. This increase in other income, net was largely a result of the reversion of certain liabilities which had been recorded by us but have not been claimed by providers and thus have been written off.

Income Tax

During the year ended December 31, 2009, we had a Ps. 9.4 million income tax expense compared to a gain of Ps. 1.8 million in the previous year. This expense was primarily a result of (i) MetroGAS' allowance for the impairment of the minimum presumed income tax and (ii) an increase in the income tax charge for MetroENERGÍA.

Net loss

Our net loss totaled Ps. 78.3 million during 2009, compared to Ps. 13.5 million in 2008. This increase in net loss was mainly a result of the decrease in our financing and holding results, an increase in our selling expenses and the loss registered in our income tax results.

Differences Between Argentine GAAP and U.S. GAAP

Our Annual Consolidated Financial Statements and the information shown in this annual report have been prepared in accordance with Argentine GAAP, which differ in certain significant respects from U.S. GAAP. Such differences involve methods of measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by U.S. GAAP and the Accounting Standard Codification ("ASC"), which includes Regulation S-X promulgated by the SEC. The following is a list of the principal differences, other than with regard to inflation accounting, between Argentine GAAP and U.S. GAAP, as they relate to us, that affected the reported amounts under Argentine GAAP of our total shareholders' equity as of December 31, 2010 and 2009 as well as net income for the years ended December 31, 2010, 2009 and 2008:

the accounting for troubled debt restructuring, which was reversed as of December 31, 2010 as a result of our Reorganization proceeding(concurso preventivo);

the accounting for deferred income taxes, regarding the (i) recognition of the inflation adjustments as a temporary difference, (ii) recognition of deferred income taxes on other reconciled items, and (iii) changes in valuation allowance of deferred tax assets and minimum presumed income tax credits;

the accounting for other receivables, regarding the recognition of certain credit corresponding to the reallocation on tariffs of levies under Argentine GAAP, which are reversed under U.S. GAAP until the time of the corresponding invoicing;

the accounting for debt restructuring expenses, which are capitalized under Argentine GAAP and expensed under U.S. GAAP; and

Notes 17 and 18 to our Annual Consolidated Financial Statements, included elsewhere in this annual report, provide a description of the main differences between Argentine GAAP and U.S. GAAP, as they relate to us and a reconciliation of shareholders' equity at December 31, 2010 and 2009 and net income for the years ended December 31, 2010, 2009 and 2008. Net (loss) income under Argentine GAAP for the year ended December 31, 2010, 2009 and 2008 was approximately Ps. (71.7) million, Ps. (78.3) million and Ps. (13.5) million, respectively, as compared to approximately Ps. 202.8 million, Ps. (188.4) million and Ps. 19.1 million, respectively, under U.S. GAAP. Shareholders' equity under Argentine GAAP as of December 31, 2010 and 2009 was Ps. 825.9 and Ps. 897.6, million, respectively, as compared to approximately Ps. 428.6 million and Ps. 225.8 million, respectively, under U.S. GAAP.

Recent Accounting Pronouncements under U.S. GAAP

See Note 20 to our Annual Consolidated Financial Statements for information regarding recent accounting pronouncements under U.S. GAAP.

Liquidity and Capital Resources

Liquidity

Historically, we maintained high levels of liquidity generated by cash flow from operations, access to capital markets and bank credit lines.

Our primary sources and uses of cash during the years ended December 31, 2010, 2009 and 2008 are shown in the table below:

	For the years ended December 31,
	2010	2009	2008
	(in millions of Pesos)
Cash and cash equivalents at the beginning of the year	128.3	53.2	29.3
Net cash provided by operating activities	302.2	251.4	172.4
Net cash used in investing activities	(119.1)	(105.8)	(84.2)
Net cash used in financing activities	0.0	(70.5)	(64.1)
Increase in cash and cash equivalents	183.1	75.1	24.2
Cash and cash equivalents at the end of the year	311.3(*)	128.3 (**)	53.5 (***)

(*) Includes Ps. 67.4 million related to cash deposited in trust funds in January 2011.

(**) Includes Ps. 54.1 million related to cash deposited in trust funds in January 2010.

(***) Includes Ps. 27.1 million related to cash deposited in trust funds in January 2009.

For purposes of our statement of cash flows, we consider all liquid investments with a maturity equal to three months or less, consisting primarily of holdings in mutual funds and fixed term time-deposits, to be cash equivalents. Our cash and cash equivalents are typically denominated in Pesos, with the remainder denominated in foreign currencies such as the U.S. Dollar. As of December 31, 2010, 2009 and 2008, our cash and cash equivalents in U.S. Dollars amounted to US$ 2.7 million, US$ 0.6 million and US$ 6.9 million, respectively.

We have certain financial obligations described under the section "Debt Restructuring" and the corresponding due dates for these financial obligations are included in Item 5.F: "Tabular Disclosure of Contractual Obligations."

The delays in the tariff adjustments detailed above have caused our financial condition to deteriorate and have affected our capacity to generate the cash flow necessary to maintain normal activities and comply with our indebtedness due in 2010: (i) US$ 21.1 million, which represents 10% of the principal amount of its Series 1 Notes, half of which was due on June 30, 2010 and the other half of which was due on December 31, 2010, and (ii) US$ 18.2 million, which represents interest due on both its Series 1 and 2 Notes; both (i) and (ii) together representing a debt service obligation of Ps. 156.3 million based on the Peso/U.S. Dollar exchange rate in effect at December 31, 2010. On January 5, 2010, our Board of Directors approved the hiring of Barclays Plc. to act as financial advisors in connection with a refinancing of our outstanding debt. Various courses of action were discussed with the creditors and the financial advisors but none of the suggested alternatives was a viable option for the Company.

Net Cash Provided by Operating Activities

Net cash provided by operating activities amounted to Ps. 302.2 million during 2010, compared with Ps. 251.4 million during 2009 and Ps. 172.4 million during 2008.

The Ps. 50.8 million increase in net cash provided by operating activities in 2010 as compared to 2009 was mainly due to a decrease in cashflow required for working capital needs of Ps. 95.8 million, partially offset by lower operating results amounting to Ps. 45.0 million as of December 31, 2010.

The decrease in cash flows required for working capital needs of Ps. 95.8 million was mainly due to an increase in account payables, payroll and social security payables and taxes payables which in turn resulted from lower debt service payments amounting to Ps. 148.9 million as of December 31, 2010 as a consequence of the Company's filing of a petition for voluntary reorganization (concurso preventivo), partially offset by i) an increase of Ps. 43.4 million in our trade receivables due to lower collections as of December 31, 2010 as compared to 2009, driven by a delay in customer payments and a delay in our invoice process due to the implementation of a new commercial system; and ii) a decrease in cash of Ps. 9.7 million, mainly due to higher income tax paid (which includes the income tax and the minimum presumed income tax paid) as of December 31, 2010 as compared to December 31, 2009.

The Ps. 79.1 million increase in cash provided by operating activities in 2009 as compared to 2008 was mainly due to the decrease in cash flows required for working capital needs, which was in turn primarily driven by an increase in accounts payable and a decrease in trade receivables.

The Ps 60.4 million increase in accounts payable in 2009 as compared to 2008 was mainly due to (a) an increase of Ps. 27.0 million in trust funds pending to be deposited as of December 2009 compared to December 2008 (b) a decrease of Ps. 19.4 million in payments to gas producers as a consequence of the Company's revised payment policy which resulted in an extended payment period to gas producers (from 100% in 30 days to 50% in 30 days and 50% in 60 days) during 2009 and which led to a corresponding increase in accounts payable, and (c) an increase of Ps 14.9 million in the Company's gas imbalance arising from gas volumes taken by the Company from the gas transportation system, in excess of those volumes provided to the Company by the gas producers pursuant to Resolution No. 599/07 in order to meet the Company's non-interruptible demand (see Note 15.1 to the Company's financial statements for the year ended December 31, 2009 included in the Form 20-F).

The Ps 24.0 million decrease in trade receivables in 2009 as compared to 2008 was mainly due to the Ps. 29.9 million decrease in unbilled revenues in 2009 as compared to 2008. This decrease in unbilled revenues was primarily a result of an increase in collections during 2009, which in turn resulted from the retroactive invoicing of the increase in the price of gas included in the consumption tariff corresponding to the period from September to December 2008 (pursuant to Resolution SE No. 1070/08), which accumulated in unbilled consumption invoices at December 2008 and were billed and collected in 2009.

Net Cash Used in Investing Activities

Net cash used in investing activities amounted to Ps. 119.1 million during 2010 compared to Ps. 105.8 million during 2009 and to Ps. 84.2 million during 2008. The increase was mainly due to an increase in our acquisition of fixed assets.

Net Cash Used in Financing Activities

Net cash flows used in financing activities amounted to Ps. 0.03 million during 2010 as compared to Ps. 70.5 million during 2009 and to Ps. 64.1 million during 2008. The decrease in net cash flows used in financing activities is mainly due to the suspension of the payment of principal and interest on the Company's outstanding debt obligations and the Company's filing of a petition for voluntary reorganization (concurso preventivo).

We did not pay any dividends in 2010, 2009 or 2008.

The statements of cash flows presented in the consolidated financial statements are prepared based on Argentine GAAP amounts. In addition, differences exist between cash flows from operating, investing and financing activities reported in the consolidated financial statements and the cash flows from operating, investing and financing activities that would be reported under ASC 230 "Statement of Cash Flows". For a description of these differences, see Note 19(f) to the Annual Consolidated Financial Statements.

Capital Resources

Since the beginning of the Argentine crisis in December 2001, we have suffered significant constraints on our liquidity and have not been able to access new sources of financing through the domestic and international financial markets as these remain closed to us. As a result of the significant and material changes in the Argentine economy, including, among other things, the suspension of utility tariff adjustments, the conversion of Dollar-denominated utility tariffs into Pesos at the rate of Ps. 1.00 per US$ 1.00, and the devaluation of the Argentine Peso, we lost our access to capital markets and other financing sources, both domestically and internationally. As a result, on March 25, 2002, we suspended regular payments of principal and interest on all of our existing financial indebtedness.

As of December 31, 2010, our total financial debt consisted of: US$ 21.1 million of our 8% Series 1 Notes past due in 2010; US$ 189.7 million of our 9% Series 1 Notes due 2011 to 2014; US$ 6.3 million of our 5% Series 2 Class A Notes due from 2012 to 2014; and Euro 26.1 million of our 3.8% Series 2 Class B Notes due 2012 to 2014, plus interest accrued until the date of Reorganization procedure of US$ 7.8, US$ 0.1 and Euro 0.5 of our Series 1 Notes, Series 2-Class A Notes and Series 2-Class B Notes. See Item 5: "Tabular Disclosure of Contractual Obligations."

Our financial debt as a percentage of our total capitalization (with the reorganization liability included) amounted to 59.6% as of December 31, 2010, 50.6% as of December 31, 2009 and 45.5% as of December 31, 2008. See Note 10 to our Annual Consolidated Financial Statements for information regarding our financial indebtedness.

As of December 31, 2010, 2009 and 2008, our cash and cash equivalents in U.S. Dollars amounted to US$ 2.7 million, US$ 0.6 million and US$ 6.9 million, respectively. We do not have any financial instruments for hedging purposes.

Debt Restructuring

On November 9, 2005, we announced the commencement of a new solicitation of consents to restructure our unsecured financial indebtedness pursuant to a new APE under Argentine law. This solicitation of consents replaces the previous APE and improves its terms. Ourproposal basically offers three options to our financial creditors:

Cash option: we offer to buy up to US$ 160 million of capital of the existing debt, in cash at a price of US$ 750 per each US$ 1,000 of capital of such debt (or its equivalent in other currencies);

Exchange Option: For Series 1 Notes, denominated in United States Dollars for a principal amount equal to 100% of the amount of the debt to be exchanged for this option. This Series is due on December 31, 2014 and pays the original principal amount of the debt in semi-annual installments beginning June 2010, and with an 8% interest rate from the initial payment to the sixth year, and 9% afterwards.

Exchange Option: For Series 2 Notes, denominated in United States Dollars, Euros and, optional to certain financial creditors, in Pesos, and for a principal amount equal to 105% of the principalamount of the debt to be exchanged for this option. This Series is due on December 31, 2014, and it pays the original principal amount of the debt in semi-annual installments beginning June 2012; it has interest rates ranging from 3% to 8% starting in the eighth year.

On April 12, 2006 we announced the acceptance of tenders of approximately 95% of the total outstanding financial debt pursuant to its restructuring offer. We also announced our intention to restructure such indebtedness pursuant to an out-of-court restructuring in order to complete the process faster and more effectively.

Furthermore, at that time, our Board of Directors approved the issuance and solicitation of consents for the public offering of Series 1 Notes for an amount of up to US$ 250,000,000, Series 2 Class A Notes for up to US$ 10,000,000, and Series 2 Class B Notes for up to Euros 40,000,000, which will be given in exchange to current bondholders.

On April 27, 2006, we announced the termination of the APE process. This termination expresses creditors' acceptance of our proposal submitted on November 9, 2005 as amended and supplemented.

On May 17, 2006, we announced that we had closed on an out-of-court basis the restructuring (the "Restructuring") of our:

US$ 93,808,000 principal amount (approximately 94%) of our 9-7/8% Series A Notes due 2003 (the "Series A Notes");

Euros 95,143,000 principal amount (approximately 87%) of our 7.375% Series B Notes due 2002 (the "Series B Notes");

US$ 130,000,000 principal amount (100%) of our Floating Rate Series C Notes due 2004 (the "Series C Notes" and, together with the Series A Notes and the Series B Notes, the "Existing Notes"); and

US$ 50,000,000 (100%) and Ps. 44,060,576 (100%) principal amount of our other unsecured financial indebtedness (the "Existing Bank Debt" and, together with the Existing Notes, the "Existing Debt").

This was done pursuant to our solicitations of powers of attorney authorizing, among other things, the out-of-court sale on behalf of such holders of the Existing Debt for cash and/or the exchange on behalf of such holders of the Existing Debt for new securities (the "Solicitations").

We also announced that, as part of the Restructuring and as contemplated by the Solicitations, we had:

Issued pursuant to an Indenture date of April 28, 2006 (the "Indenture") and in exchange for the Existing Debt:

Series 1 Notes amounting to US$ 236,285,638 in principal amount;

U.S. Dollar-denominated Series 2 Notes amounting to US$ 6,254,764 in principal amount;

Euro-denominated Series 2 Notes amounting to Euros 26,070,450 in principal amount; and

Made payments amounting to:

US$ 105,608,444.71 to repurchase Existing Debt tendered into or reallocated to the cash option under the Solicitations, and

US$ 19,090,493.96 and Euros 469,268.10 in respect of interest that would have accrued on the Series 1 Notes and the Series 2 Notes through December 30, 2005 had they been issued on January 1, 2005.

After giving effect to the issuance of the Series 1 Notes and Series 2 Notes and the retirement of the Existing Debt that had been exchanged for Series 1 Notes and Series 2 Notes or repurchased by us, our unsecured financial indebtedness amounted to the equivalent of US$ 299.9 million based on exchange rates on May 12, 2006, the date on which we issued and exchanged our Notes.

The Indenture contains negative covenants that limit our ability to enter into certain transactions and make certain payments. The negative covenants contained in the Indenture include: (i) a limitation on our ability to encumber or create liens on our assets of our subsidiaries, in order to service (a) any of our indebtedness, (b) any guarantee extended by us or our subsidiaries, or (c) any indebtedness or guarantees of any other person; (ii) a limitation on our ability to incur additional indebtedness, except in certain specific instances, and not to exceed US$ 20 million; (iii) a limitation on our capital expenditures until US$ 75.0 million of the Series 1 Notes is paid; (iv) a limitation on making certain payments until we have amortized US$ 75.0 million of the Series 1 Notes; (v) a limitation on the sale of our assets; (vi) a prohibition on certain sale and leaseback transactions, except those transactions existing prior to the date of the Indenture, or any sale and leaseback transaction, the proceeds of which do not exceed US$ 25.0 million; (vii) a limitation on our ability to merge, consolidate, sell, convey or lease substantially all of our property, unless after such merger, consolidation or conveyance, any corporation formed by such transaction expressly assumes the due and punctual payment of the notes issued pursuant to the Indenture; (viii) a prohibition on taking or refraining from taking any action that would result in the termination of our license by the Government; and (ix) a limitation on our ability to enter into transactions with our affiliates and shareholders. Our breach of any of these covenants or our failure to meet any of these conditions could result in a default under any or all of such indebtedness. Our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions, proceedings affecting our license and the tariff renegotiation process. In addition, if we are unable to generate sufficient cash flow from operations, we may be required to refinance some or all of our outstanding debt or obtain additional financing. We cannot assure you that a refinancing would be possible or that any additional financing could be obtained on acceptable terms.

Pursuant to the excess cash redemption provision, we calculated the respective amount for the periods beginning on October 1, 2008 and ending on March 31, 2009, 2008 and 2007 and for the period beginning on April 1st, and ending on September 30, 2009, 2008 and 2007. No excess cash was computed as a result. Moreover, we have complied with all of the above-mentioned restrictions, including the payment obligations acquired under the current global Negotiable Bonds Program.

During 2006 and 2007, the Company carried out market purchases amounting to a cumulative principal amount of the Series 1 Notes of US$ 25.4 million. The Company did not carry out market purchases in the years ended December 31, 2010, 2009 and 2008.

On June 17, 2010, the adverse financial conditions we face as a result of this continued delay in our tariff and license negotiation led our Board of Directors to approve our filing of a petition for voluntary reorganization (concurso preventivo) in an Argentine court. This reorganization filing generated an event of default under our outstanding debt obligations. Pursuant to the terms of our outstanding debt obligations, this default resulted in the automatic acceleration of our outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on our outstanding debt obligations.

See Note 18 (d) to the Annual Consolidated Financial Statements for a description of the differences in the accounting for troubled debt restructuring between Argentine GAAP and U.S. GAAP.

Future Capital Requirements

As part of our strategy, we embarked on and continued through 2001 a major capital expenditure program designed to extend and renovate pipelines, regulators, valves and meters, to ensure the safety and reliability of our distribution system, to modernize and centralize our information systems and to upgrade our customer service branch network. We expended approximately Ps. 524.9 million in capital expenditures from 1993 through 2001. Due to the financial crisis in Argentina, beginning in 2002 we reduced our capital expenditures to the necessary amounts required to fulfill our license provisions and ensure safe operation of the network. Thus, we reduced our capital expenditures and preventive maintenance programs without affecting our ability in the near-term to serve our customers safely or operate our network in accordance with quality and environmental standards. We made capital expenditures of approximately Ps. 221.7 million between 2002 and 2007. Our capital expenditures during 2008, 2009 and 2010 amounted to approximately Ps. 84.2 million, Ps. 105.8 million and Ps. 119.1 million, respectively.

We applied a part of our available cash to continue the minimum maintenance activities necessary to ensure the safety and reliability of our system. We believe that our expected future capital expenditures will be financed with cash provided by operating activities and that our capital expenditures for 2011 will be principally applied to ensure the safe operation of our network in accordance with the terms of our license. Additionally, as a result of our filing for a voluntary reorganization proceeding in an Argentine court on June 17, 2010, an automatic stay was put into place on our payment of principal and interest on our outstanding debt obligations, which will thus provide additional cash resources (normally destined for our debt service payments) for us to apply to our capital expenditures plan. However, we cannot predict how long the voluntary reorganization proceeding, and hence the automatic stay, will last.

Research and Development, Patents and Licenses

Not applicable.

Trend Information

See Item 3: "Key Information-Risk Factors" and Item 4: "Information on the Company-History and Development of the Company-Supply of and Demand for Natural Gas," and Item 4: "Information on the Company-Business Overview-Regulatory Framework."

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably expected to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, in each case, the disclosure of which would be material to investors.

Tabular Disclosure of Contractual Obligations

The following table sets forth a summary of our contractual obligations and commercial commitments as of December 31, 2010:

	Without due date	2011	2012	2013	2014	2015	More than five years	Total
	(in millions of Pesos)
Financial Debt (1)(*)	1,034.6	-	-	-	-	-	-	1,034.6
Power Plant Sales (2)	-	72.0	72.0	72.0	72.0	55.6	72.2	415.6
Transportation Capacity (3)	-	190.0	184.4	184.4	69.6	12.2	7.1	647.8

	2011	2012	2013	2014	2015	More than five years
	MMCM per day
Power Plant Sales	10.5	10.5	10.5	10.5	7.39	5.1
Transportation Capacity	23.4	22.6	22.6	8.0	0.7	0.2

(1) On June 17, 2010, we filed a petition for voluntary reorganization (concurso preventivo) in an Argentine court. This reorganization filing generated an event of default under our outstanding debt obligations. Pursuant to the terms of our outstanding debt obligations, this default resulted in the automatic acceleration of our outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on our outstanding debt obligations. See Item 3: "Key Information-Risk Factors Relating to Us- Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors have issued an opinion that contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern", Item 4: "Information on the Company-Business Overview-Commercial Contracts" and Item 5: "Operating and Financial Review and Prospects-Liquidity and Capital Resources-Debt Restructuring."

(2) For these estimated committed amounts, we have considered prices established in Resolution No. 1,417/08 issued by the Energy Secretariat and adjusted these figures by segments based on the Company's historical information.

(3) For these estimated committed amounts, we have considered transportation prices as of December 31, 2010 that remain unchanged as of the date of this annual report.

(*) Total Financial Debt amounts included in the Reorganization liability amounts Ps. 1,034.6 million. The following table shows the amounts of Financial Debt included in the reorganization liability as of December 31, 2010:

	(In thousands of Ps.)
Interest Negotiable Obligations - Series 1 -	30,925
Interest Negotiable Obligations - Series 2 - Class A	573
Interest Negotiable Obligations - Series 2 - Class B	2,409
Subtotal Interest Financial Debt	33,907

Negotiable Obligations - Series 1 -	838,322
Negotiable Obligations - Series 2 - Class A	24,869
Negotiable Obligations - Series 2 - Class B	137,459
Subtotal Financial Debt	1,000,650
Total Financial Debt (include in Reorganization liability)	1,034,556

Safe Harbor

Not applicable.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

The management of our business is vested in our Board of Directors. OurEstatutos Sociales (By-laws) provide for a Board of Directors consisting of eleven directors and the same number of alternate directors. Each alternate director may attend meetings of the Board of Directors and vote in the absence of the director for whom such alternate director is acting. Directors and alternate directors are elected at the special shareholders' meeting for each class of our stock, which is called at the same time as our annual ordinary shareholders' meeting, to serve from one to three-year renewable terms as resolved at the relevant shareholders meeting. However such elected directors and alternate directors will serve until new directors and alternate directors are elected at a special shareholders' meeting for each class of stock. The Board of Directors meets at least once every three months and upon the request of any member of the Board of Directors.

During 2010, our Board of Directors met 20 times.

Holders of our Class C Shares have the right to elect one director and one alternate director. Holders of our Class B Shares have the right to elect four directors and four alternate directors. Holders of our Class A Shares have the right to elect six directors and six alternate directors. See Item 7: "Major Shareholders and Related Party Transactions."

The members of our Board of Directors as of the date of our annual report are set forth below:

Name		Position		Served on the Board Since		Last Appointment		Date of Expiration of Term
Juan Carlos Fronza	(b)		President		2004		2010		2010
Diego Garzón Duarte	(a)		Director		2010		2010		2010
Jorge Alberto Depino	(c)		Director		2004		2010		2010
Luis Chaparro	(c)		Alternate		2004		2010		2010
Raúl Rafael Podetti	(b)		Director		2008		2010		2010
Santiago Albarracín	(a)		Alternate		2009		2010		2010
Ramiro Rico	(b)		Director		2009		2010		2010
Sergio Ferrero	(b)		Alternate		2009		2010		2010
Héctor Caram	(b)		Director		2010		2010		2010
Jorge Gustavo Casagrande	(a)		Director		2010		2010		2010
George Michel Morgan	(a)		Director		2010		2010		2010
Carlos Emilio Rogelio Messi	(a)		1st Vice President		2010		2010		2010
Carlos Alberto Alemán	(a)		Director		2010		2010		2010
Marcelo Pablo Domínguez	(a)		2nd Vice President		2010		2010		2010
Fernando Gómez Zanou	(a)		Alternate		2010		2010		2010
Leonardo Raúl López	(a)		Alternate		2010		2010		2010

__________

Notes:

(a) Representative of Class A shareholders.

(b) Representative of Class B shareholders.

Set forth below are brief biographical descriptions of our directors:

Juan Carlos Fronza, 75, is the President of our Board of Directors. He received a degree in mechanical engineering from the Universidad de La Plata. From 1964 to 1977, he worked for Astilleros Rio Santiago. From 1978 to 1982, he was an Investment Project Manager at Petrolera Argentina San Jorge and from 1983 to 2002, as the Chief Executive Officer of Copetro S.A.

Diego Garzón Duarte, 46, received a degree in public accounting from the Universidad Nacional de Córdoba. He has more than 20 years of executive experience, managing an oil and gas company and in doing so performing work related to marketing and commercial functions, M&A transactions, privatization processes, corporate finance and planning. From 1987 to 1992, he worked at Techint Group and Arthur Andersen & Co. Since 1992, he has worked at Compañía General de Combustibles S.A. as an executive.

Jorge Alberto Depino, 51, is a member of our Board of Directors. He is a mechanical technician. From 1981 to 1992, he worked for Gas del Estado S.E. From 1992 to 2002, he worked in MetroGAS' operations department.

Luis Chaparro, 43, is an alternate member of our Board of Directors. He is a technician. Prior to working at MetroGAS, he worked for Gas del Estado from 1992 to 1998. He currently works for Xerox S.A.

Raúl Rafael Podetti, 80, is a member of our Board of Directors. He received a degree in naval architecture and mechanical engineering from the Universidad de Buenos Aires. From 1954, he was a member of the Argentine Navy until he retired in 1965. He has worked in the shipbuilding industry, holding management positions, for 35 years. He works as a consultant specializing in marine business.

Santiago Albarracín, 44, is a member of our Board of Directors. He received a law degree from the Universidad Católica Argentina and a master of laws in resources law and policy from the Centre for Energy, Petroleum and Mineral Law and Policy, University of Dundee. He was an attorney with Dabinovic and Associates and with Cardenas & Cassagne, and then at the Legal Matters Department of MetroGAS Contracts and Regulations. Through 2006, he was Legal Manager for South America at Sempra Energy International and a member of the board of directors of Sodigas Pampeana y Sur, Camuzzi Gas Pampeana y Sur (Argentina), Chilquinta Energía and Enargas S.A. (Chile), Luz del Sur S.A. (Peru), and Conecta S.A. (Uruguay). Presently, he also is an independent advisor, specializing in energy law and natural resources, and a member of the board of directors of Gas Argentino.

Ramiro Rico, 54, is a member of our Board of Directors. He worked at Gas del Estado S.E. for 17 years performing different technical and planning functions in the supply area; during those years, he was appointed Manager. Afterwards, he was the director of a constructing company, an auditor at two healthcare organizations (Obra Social del Personal Superior de la Industria del Gas(OSPESGA) andObra Social de Técnicos del Fútbol(OSTFA)) and the President of Administradora Full S.A. Recently, he has been a private advisor on management issues for many companies (among them Swiss Medical S.A.) and for theFederación de Trabajadores de la Industria del Gas Natural en la República Argentina. He also has been involved in commercial activities not related to the energy area.

Sergio Ferrero, 34, is an alternate member of our Board of Directors. He received a degree in public accounting from the Faculty of Economic Sciences of the Universidad de Buenos Aires. From 1998 to 2005, he worked at Del Buono, Malasio & Asociados Accounting Studio. Since 2005, he has been a consultant for Management Control in the area of accounting and finance for the Ministry of Federal Planning, Public Investment and Services, under the National Executive Power.

Héctor Caram, 45, is a member of the Board of Directors. He received a degree in public accounting from the Universidad de Buenos Aires. From 1987 to 2003, he held various positions at Pistrelli, Díaz y Asociados, which was part of Arthur Andersen until 2002 and then Ernst & Young. In 1998, he became Audit Senior Manager. From 2003 to 2007, he was Director of Internal Audit at Telecom Argentina. Since 2007, he has been the Business Risk Management Director at SMS Argentina and also an independent consultant. Since 2008, he has been an advisor for the Audit Committee of Edenor y Electricidad Argentina.

Jorge Gustavo Casagrande, 42, is a member of the Board of Directors. He received a public accounting degree from the Universidad Católica Argentina, a master's degree in administration of electric markets from the Buenos Aires Technological Institute ("ITBA"), and degree from the Program of Executive Development at the IAE Management and Business School of the Universidad Austral. From 2001 to 2006, he was the Manager of Gas and Power Assets at Perez Companc (subsequently renamed Petrobras Energía). He also served as a member of the board of directors of TGS, Transener, Edesur and Compañía Mega. From 2006 to 2009, he served as the General Manager of TGS. Presently, he also is the president of the board of directors of Gas Argentino.

George Michael Morgan, 57, is a member of the Board of Directors. He received a degree in geology from the University of Texas. He has worked in Europe, South America, and Central and Southeast Asia. He has been an executive at Unocal do Brasil, and Unocal Venezuela. He has experience in the entire energy production and distribution chain, including exploration and production, pipelines, power projects, liquified natural gas terminals, and electric and gas distribution. He served on the boards of directors of companies such as Promigas (Colombia), TGS, Oleoducto Transandino and Camuzzi (Argentina), Chilquinta (Chile), and Luz Del Sur (Peru). Presently, he is also a member of the board of directors of Petrodelta and Fusion Geophysical International. He also serves as a member of the board of directors of Gas Argentino and as vice president of the board of directors at Harvest Natural Resources.

Carlos Emilio Rogelio Messi, 56, is the First Vice President of our Board of Directors. He received a law degree from the Universidad de Buenos Aires and a master's degree in comparative jurisprudence from the New York University School of Law. For sixteen years, he was a legal counsel at Allende & Brea. Since 1992, he has served as a lawyer at the Legal Department of Shell Compañía Argentina de Petróleo S.A. Presently, he also is a member of the board of directors of Gas Argentino and MetroENERGIA.

Carlos Alberto Alemán, 56, is a member of our Board of Directors. He received a law degree from the Universidad de Buenos Aires. He is a Partner at Alemán, Dominguez & Asociados. Presently, he is also the vice president of the board of directors of Gas Argentino.

Marcelo Pablo Domínguez, 50, is the Second Vice President of our Board of Directors. He received a law degree from the Universidad Católica Argentina. He is a Partner at Alemán, Dominguez & Asociados.

Fernando Gómez Zanou, 39, is an alternate member of our Board of Directors. He received a law degree from the Universidad de Buenos Aires. He has worked as an attorney at several companies, including Citibank N.A., Basf Argentina S.A. and Auchan Argentina S.A. Since 2004, he has worked as in-house counsel at YPF S.A. He also served as an alternate member of the board of directors at YPF Inversora Energética S.A., and Pluspetrol Energy S.A., and as a member of the board at YPF Servicios Petroleros S.A. Presently, he is also a member of the board of directors of Gas Argentino.

Leonardo Raúl Lopez, 44, is an alternate member of our Board of Directors. He received a law degree from the Universidad Nacional de Rosario. He has worked as an attorney at several companies, including Nuevo Banco de Santa Fe S.A., Banco de Santa Cruz S.A. and Banco de San Juan S.A. Since 2009, he has worked as in-house counsel at YPF S.A. Presently, he also is an alternate member of the board of directors at Gas Argentino and an alternate sindic of Compañía Mega S.A.

Officers

Set forth below is a list of our principal executive officers at December 31, 2010. All of our executive officers are residents of Argentina.

Name	Position	Since
Andres Cordero	General Director	2007
Patricia Carcagno	Director of Operations	2005
Enrique Barruti	Human Resources Director	1997
Fernando Aceiro	Commercial Director	2002
Magdalena Gonzalez Garaño	Legal and Regulatory Affairs Director	2004
Eduardo Villegas Contte	Administration and Finance Director	2002
Juan Pablo Mirazon	Internal Auditor Director	1999
Fernando Nardini	Comptroller	2009

Andrés Cordero, 65, was appointed General Director in 2007. He received a degree in industrial engineering from the Universidad Católica Argentina and in oil engineering from the Universidad de Buenos Aires. From 2002 to August 2007, he was the General Manager at Gasoducto Cruz del Sur S.A. Prior to this position, he was Manager for Regulatory and Institutional Matters at Transportadora de Gas del Norte S.A

Patricia Carcagno, 49, was appointed Director of Operations in 2005. Ms. Carcagno received a degree in chemical engineering from the Universidad de Buenos Aires. Prior to her position as Director of Operations, she was Manager of the Operations Planning Department. Before joining us in 1992, she worked in the Business Development Department at ASTRA C.A.P.S.A., where she held various commercial positions.

Enrique Barruti, 62, was appointed Human Resources Director in 1997. He received a degree in economics and completed post-graduate studies in human resources at the University of Michigan. He has more than 20 years of local and international experience in human resources. Before joining us in July 1997, he worked at Unysis Corporation, Bank of America, Banco Santander and Swift Armour S.A. Argentina. He also worked as a management consultant, and a professor at the Universidad de Buenos Aires and the Universidad Austral.

Fernando Aceiro, 46, was appointed Commercial Director in 1998. He received a degree in industrial engineering from the Universidad Católica Argentina and a master degree in business administration from Instituto de Altos Estudios Empresariales. He started his career at Alpargatas S.A.I.C. in the production department. From 1993 until he joined us in 1998, he worked for Banco de Galicia in the New Businesses Department.

Magdalena Gonzalez Garaño, 59, was appointed Legal and Regulatory Affairs Director in 2004. She received a law degree from the Universidad de Buenos Aires. From 1991 to 1993, she was an Associate at Cardenas, Cassagne & Asociados. In 1993, she joined us as Regulatory Affairs Manager and in 1998, was appointed Legal Manager. Since 1993, she has been the Secretary for Gas Argentino's Board of Directors.

Eduardo Villegas Contte, 55, was appointed Administration and Finance Director in 2002. He received a degree in accounting from the Universidad de Buenos Aires and completed graduate studies at the J.L. Kellogg Graduate School of Management at Northwestern University. Before joining us in 1994 as Finance Manager, he worked for Arthur Andersen.

Juan Pablo Mirazon, 43, was appointed Internal Auditor Director in 1999. He received a degree in accounting from the Universidad Católica Argentina and a degree in business administration from the Universidad Católica Argentina. He worked for Arthur Andersen for over ten years in the Auditing Division and in the Management Advice Division.

Fernando Nardini, 46, was appointed Corporate Controller in 2009. He received a degree in public accounting from the Universidad de Buenos Aires. He has completed specialized studies in Argentina (IAE-Universidad Austral), New York (World Trade Center) and London (CWC School for Energy). Before joining MetroGAS, he worked for Arthur Andersen, Dow Chemical and YPF, including its subsidiary Maxus Energy Corp. in Dallas, Texas. In Dallas, he was responsible for administration and finance.

Supervisory Committee

Our By-Laws provide for aComisión Fiscalizadora (Supervisory Committee) consisting of three members and three alternate members elected by our shareholders for one year terms. Holders of Class A Shares are entitled to elect two members and two alternate members of the Supervisory Committee. As a result, Gas Argentino is entitled to elect a majority of the members of the Supervisory Committee. See Item 7: "Major Shareholders and Related Party Transactions."

Under our By-Laws, among others, the Supervisory Committee shall meet at least once every three months, but may be called by any member of the Committee. The quorum for such meeting of the Supervisory Committee is three of its members being present. Resolutions of the Supervisory Committee must be passed by a majority of its members to be valid. Under the Argentine Corporations Law, the functions of the Supervisory Committee include attending all meetings of the Board of Directors, overseeing compliance by the Board of Directors of applicable laws, our By-Laws and shareholders' resolutions, preparing a report to our shareholders on our financial statements, attending shareholders' meetings and providing information upon request by holders of at least 2% of our capital stock. The Supervisory Committee is also authorized to call ordinary when the Board of Directors fails to do so as required and extraordinary shareholders' meetings and to place items on the agenda for meetings of shareholders or the Board of Directors. Members of the Supervisory Committee must be lawyers or accountants qualified under Argentine law or a non-commercial partnership of lawyers or accountants. Our directors, officers or employees and those of our affiliates may not be members of the Supervisory Committee.

The members and the alternate members of the Supervisory Committee as of the date of this annual report are set forth below:

Name	Position	Since	Profession	Date of Appointment
Diego María Serrano Redonnet	Member	2005	Attorney	2010
Maria Gabriela Grigioni	Member	2005	Attorney	2010
Oscar Alberto Orona	Member	1997	Attorney	2010
German Fernandez Lahore	Alternate	2005	Attorney	2010
Guillermo Quiñoa	Alternate	2009	Attorney	2010
Pablo Rueda	Alternate	2005	Attorney	2010

Diego María Serrano Redonnet, 44, received a law degree from the Universidad Católica Argentina and a master of laws from Harvard University. He is a Partner at Pérez Alati in Buenos Aires, Argentina, specializing in banking and corporate law. He is a member of the Supervisory Committee of Telecom Argentina S.A., Telecom Personal S.A., Sofora Telecomunicaciones S.A., Banco Santander Río S.A., BJ Services S.R.L., BRS Investment S.A., America Latina Tecnología S.A., Santander Río Servicios S.A., Perevent Empresa de Servicios Eventuales S.A., Prestamos de Consumo S.A., Santander Río Trust S.A., Santander Sociedad de Bolsa S.A. and Gas Argentino.

María Gabriela Grigioni, 47, received a law degree from the Universidad de Buenos Aires. She was assistant professor at the Law School of the University of Buenos Aires and UADE University on Corporate and Commercial law from 1992 to 1996. She has published widely on various topics of capital markets and corporations and has participated in conferences and seminars as a speaker. From 1987, she worked as a Commercial Law Advisor in the legal department of various auditing firms and companies, and then served as Chief of Division on the Issuers Department of the National Securities Commission (Comisión Nacional de Valores) from 1991 to 1994. She was also counselor to the Under-Secretary of Registration Affairs of the Ministry of Justice of the Republic of Argentina during 2006 and 2007. She is a Partner at Pérez Alati in Buenos Aires, Argentina.

Oscar Alberto Oroná, 62, received a law degree from Belgrano University. He completed the Petroleum Management Certificate Program in Boston, Massachusetts. He has worked as an Associate at Cassagne Abogados in Argentina. He also worked at Brons & Salas, at ASTRA C.A.P.S.A. as the Legal Manager for Exploration and Production and at YPF S.A. for Argentina, Brazil and Bolivia. Presently, he is a member of the Supervisory Committee at Oleoductos del Valle S.A. and an alternate member of the Supervisory Committee at YPF S.A.

German Fernandez Lahore, 41, received a law degree from the Universidad de Buenos Aires and a master's degree in natural resources law from the Centre for Energy, Petroleum, Mineral Law and Policy of the University of Dundee, Scotland (United Kingdom). In 1997, he attended the Universidad de Buenos Aires' Oil and Natural Gas Specialization program. In 1998, he participated in the Academy of American and International Law at the Southwestern Legal Foundation in Dallas, Texas. He has worked as an Associate at Beccar Varela, de Quintana Minerals Santa Cruz and a Foreign Associate at Haynes and Boone in Dallas, Texas. Since 2002, he worked on Oil Matters Management in the Legal Matters Department of YPF.

Guillermo Quiñoa, 44, received a law degree and a master degree in oil and gas law from the Universidad de Buenos Aires. In 1994, he worked as an associate at the San Francisco, California offices of Pillsbury, Madison & Sutro. Since 1997, he has been a Partner at Pérez Alati in Buenos Aires, Argentina. He is a member of the Bar Association of the City of Buenos Aires and the Bar Association of San Isidro, Province of Buenos Aires.

Pablo Rueda, 47, received a law degree and a master's degree in oil and gas from the Universidad de Buenos Aires. He was Chief of the Argentine Ministry of Justice's Cursos del Sistema Argentino de Informatica Juridica. He has worked as an Associate at Marval, O'Farrell & Mairal in New York and a Foreign Associate at Rabin Leacock Lipman in the United Kingdom. He is currently a partner in Pérez Alati in Buenos Aires, Argentina.

Audit Committee

Pursuant to Decree No. 677/01 the CNV issued Resolutions No. 400 on March 26, 2002 and No. 402 on April 25, 2002, setting out preliminary criteria for establishing Audit Committees (Comites de Auditoria). Accordingly, we are required to establish an Audit Committee comprised of at least three directors the majority of whom must be independent of us and our controlling shareholders and may not hold any executive position with us. As required by Resolution No. 402/02, on May 27, 2003, the Board of Directors approved the Statute for the Audit Committee.

In light of developments in local regulations and American law concerning corporate governance, our Board of Directors established on May 7, 2004 an Audit Committee consisting of three directors. The role of the Audit Committee is (1) to maintain a suitable system of controls; (2) to monitor risk management activities; (3) to monitor compliance with law and regulations; (4) to review our accounting information and oversee compliance with generally accepted accounting principles; (5) to supervise internal audit activities; (6) to monitor the external audit process; and (7) to supervise behavior to insure that it is ethical.

The Board of Directors appoints the members of the Audit Committee and may increase or reduce the number of its members. The members' duties may not be delegated.

The members of the Audit Committee are Héctor Caram, Juan Carlos Fronza and Raúl Rafael Podetti, each of whom were appointed at the shareholders meeting on April 30, 2010 for terms of one year. Our Board of Directors has determined that Héctor Caram meets the requirements of an "audit committee financial expert," as defined by the SEC. All of the members of our Audit Committee are independent in accordance with Argentine listing standards and Rule 10A-3 under the Securities Exchange Act.

Other Positions Held

The following table lists the director positions that the members of the Board of Directors hold in other companies as of the date of this annual report:

Name	Profession	Company	Position
Juan Carlos Fronza	Mechanical Engineer	--	--
Diego Garzón Duarte	Public Accountant	Gas Argentino Oilstone Energia Total Gas Electricidad Argentina	Director President Syndic Syndic
Jorge Alberto Depino	Mechanical Technician	--	--
Luis Chaparro	Technician	--	--
Raúl Rafael Podetti	Business Consultant	--	--
Santiago Albarracín	Lawyer	Gas Argentino Petrolera del Conosur	Alternate Director Director
Ramiro Rico	Business Consultant	Administradora Full S.A.	Director
Sergio Ferrero	Business Consultant	--	--
Héctor Caram	Public Accountant	--	--
Jorge Gustavo Casagrande	Public Accountant	Gas Argentino	President
George Michel Morgan	Business Executive	Gas Argentino Harvest Natural Resources Petrodelta Fusion Geophysical International	Director Vice President Director Director
Carlos Emilio Rogelio Messi	Lawyer	Gas Argentino MetroENERGÍA BG Argentina S.A. Gas Link S.A.	Director Director Director Director
Carlos Alberto Aleman	Lawyer	Gas Argentino	Vice President
Marcelo Pablo Domínguez	Lawyer	--	--
Fernando Gómez Zanou	Lawyer	Gas Argentino	Director
Leonardo Raúl López	Lawyer	Gas Argentino Compañía Mega S.A.	Alternate Director Alternate Sindic

Compensation

Argentine law provides that the aggregate annual compensation paid to all directors (including those directors acting in an executive capacity) in respect to a fiscal year may not exceed 5% of our earnings for such year if we are not paying dividends on earnings. This limitation increases in proportion to the amount of dividends paid up to a maximum of 25% of earnings. Such compensation is approved at an ordinary meeting of our shareholders. Under Argentine law, the compensation of directors acting in an executive capacity, together with the compensation of all other directors and statutory auditors, requires the approval of our shareholders. For the year ended December 31, 2010, the aggregate compensation of all directors and alternate directors paid or accrued in that year for services in all capacities was Ps. 1.1 million and for executive officers paid or accrued in that year for services in all capacities was Ps. 6.65 million. Certain of our directors voluntarily forfeited their accrued compensation.

Board Practices

Our Board of Directors' duties and responsibilities are established by Argentine law and our By-Laws, and are comprised of a minimum of eleven directors and alternate directors. The directors and alternate directors serve from one to three-year renewable terms, as resolved at the relevant shareholders meeting and are elected at special shareholders' meetings held in conjunction with our annual ordinary shareholders' meeting. Our Board of Directors meets quarterly in compliance with Argentine law and also holds meetings when called by any board member.

No Director or principal executive officer has entered into an employment agreement with us. No contracts for services were entered into between us and the directors or executive officers providing for benefits upon termination of their office or employment, other than as provided by law.

Employees

At December 31, 2010, we had 1,038 full-time and 1 part-time employee. The following table sets forth the number of employees at December 31, 2010, 2009 and 2008 by department:

Department	Number of Employees at	Number of Employees at	Number of Employees at
	December 31, 2010	December 31, 2009	December 31, 2008
General Directorate	55	53	45
Operations	449	437	438
Human Resources	53	65	56
Commercial	382	405	376
Corporate Affairs	16	14	13
Administration & Finance	84	78	93
Total	1,039	1,052	1,021

As of December 31, 2010, approximately 36.2% of our employees were affiliated with Sindicato Trabajadores Industria de Gas ("STIGAS"), and 48.9% are non-unionized employees, including senior management. Although we have previously entered into collective bargaining agreements with UPS, we have no current collective bargaining agreement with it. The collective bargaining agreement with APJ entered into in 1993 remains in force. In March 2007, we entered into a collective bargaining agreement with Sindicato Capital. We consider our current relations with our work force to be stable and constructive. There have been no strikes or work stoppages initiated by our employees since our formation. However, no assurances can be given that conflicts with the unions or individuals will not occur in the future and if such conflicts arise, we cannot predict the effects of them on our operations.

Share Ownership

As of the date of this annual report, Jorge Alberto Depino, one of our directors, owned a total of 52,910 Class C Shares and Luis Chaparro, one of our alternate directors, owned a total of 25,719 Class C Shares. This share ownership represents less than 1% of our shares. No other director or member of senior management owns any of our capital stock as of the date of this annual report.

We have no arrangements for the issuing or granting of our options, shares or securities to our employees nor do we have any other arrangement for involving our employees in our capital.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

Our shares are comprised of three classes of common stock, par value Ps. 1.00 per share: (1) Class A shares representing 51% of our capital stock, (2) Class B shares representing 39% of our capital stock and (3) Class C Shares representing 10% of our capital stock. Each class of shares is entitled to one vote. As of the date of this annual report, the number of our outstanding shares by class was as follows:

Class	Number of Shares
Class A	290,277,316
Class B	221,976,771
Class C	56,917,121

The table below sets forth our shareholders and their respective shareholdings as of December 31, 2010.

Shareholders	Class of Shares	Number of Shares Owned	Approx. % of Class	Approx. % of Outstanding Shares


Gas Argentino	A	290,277,316	100.0%	51.0%
Gas Argentino	B	108,142,529	48.7%	19.0%
British Gas International B.V.	B	38,941,720	17.5%	6.8%
ANSES	B	38,799,033	17.5%	6.8%
Private Investors	B	36,093,489	16.3%	6.3%
PPP(a)	C	56,917,121	100.0%	10.0%
Total		569,171,208	N/A	100.0%

Notes:

(a) The Class C Shares were set aside by the Argentine Government and were made available for the benefit of our eligible employees through the PPP. See Item 4: "Information on the Company-History and Development of the Company-Privatization of Gas del Estado and Our Creation."

In November 1994, we completed a worldwide offering of 93,500,000 Class B Shares, or the "Combined Offering," consisting of 5,610,000 American Depositary Shares, each representing ten Class B Shares, offered outside Argentina and 37,400,000 Class B Shares offered in Argentina. All of the Class B Shares sold in the Combined Offering were sold by the Argentine Government, acting through the Ministry of Economy and Public Works and Services. The Class B Shares sold in the Combined Offering represented approximately 18.2% of our outstanding capital stock. As a result of the Combined Offering, the Argentine Government's ownership percentage of our stock was reduced from 20% to approximately 1.8%. In January 1997, the Argentine Government sold its remaining shareholding in us to private investors.

Gas Argentino

Gas Argentino, an Argentine corporation formed for the purpose of, and limited by its by-laws to, acting as the holding company for our shares, owns 70% of our shares, including all the Class A Shares (representing 51% of our capital stock) and 48.7% of the Class B Shares (representing 19% of our capital stock). Our Class B Shares represent in the aggregate 39% of our total stock. Gas Argentino controls our Board and, therefore, our dividend policy and has the power to approve or object to the declaration, amount, if any, and payment of our dividends, subject to applicable laws.

Pursuant to the terms of the Pliego and since February 9, 1999, Gas Argentino has had the right to freely dispose of its Class B Shares but is required to hold on to its Class A Shares during the term of our license, unless otherwise authorized by ENARGAS as described below. Since December 28, 1995, ENARGAS has had the right to consent to any transfer by Gas Argentino of its Class A Shares to a transferee which will own all of our Class A Shares (i) if the quality of the service provided by us will not be affected by the transfer and (ii) if it is made pursuant to a transaction in which the existing Technical Assistance Agreement or a new agreement approved by ENARGAS is in force. The aforementioned restrictions apply in the event of any dilution of the shareholdings of Gas Argentino in us by virtue of the issuance of shares or by other means.

Gas Argentino may petition ENARGAS for permission to liquidate its assets and distribute its holdings in us to its own shareholders. Such approval may be granted if ENARGAS determines that the capital market conditions are appropriate and if such action would not adversely affect the public interest.

On December 7, 2005, Gas Argentino entered into an agreement with the holders of its financial indebtedness (funds managed by Ashmore Investment Management Limited, or the "Ashmore Funds," and Marathon Asset Management) to discharge all financial obligations related to such financial indebtedness in exchange for (i) the issuance by Gas Argentino and/or the transfer by Gas Argentino's current shareholders to the Ashmore Funds of Gas Argentino's common stock amounting to 30% of Gas Argentino's post-issuance common stock, and (ii) the transfer to the Ashmore Funds and Marathon Asset Management of approximately 19.2% and 80.8%, respectively, of our Class B Shares owned by Gas Argentino (representing approximately 3.65% and 15.35%, respectively, of our capital stock). Gas Argentino has also informed us that such restructuring is subject to, among other things, approval by ENARGAS and of the Secretary of Interior Commerce with prior agreement of the CNDC. While ENARGAS' approval was obtained, the CNDCs approval and the Secretariat of Interior Commerce's authorization were pending.

On May 15, 2008, Gas Argentino received a letter from Marathon Funds stating their willingness to terminate the financial debt restructuring agreement signed by Gas Argentino on December 7, 2005 with all its creditors. Marathon exercised the power as set forth in said agreement, which stated that any holder of Gas Argentino's financial indebtedness would be able to terminate the agreement if corresponding approvals were not obtained.

Additionally, it is important to point out that Gas Argentino is affected by Article No. 206 of the Argentine Corporations Law, which states that if a company's losses for any year exceed its reserves plus 50% of its capital stock at the end of such year, such company is required to reduce its capital stock unless it receives a capital contribution sufficient to restore its financial condition. Shares in Gas Argentino as of December 31, 2010 were held as follows:

Shareholder	Percentage of Outstanding Common Shares of Gas Argentino	Indirect Percentage Interest in MetroGAS
BG Inversiones Argentinas S.A.	54.67%	38.27%
YPF Inversora Energetica S.A.	45.33%	31.73%
Total	100.00%	70.00%

Set forth below is a brief description of Gas Argentino's shareholders.

BG Inversiones Argentinas S.A.

BG Inversiones Argentinas S.A. is a wholly owned subsidiary of BG Group. BG Group is a corporation which emerged from a privatization carried out by the British government in 1986 and certain subsequent restructurings. BG Group owns and operates one of the world's most extensive gas transportation systems. It is also a leader in technology and research and provides consulting and technical assistance throughout the world.

YPF Inversora Energetica S.A.

YPF Inversora Energetica S.A. is a subsidiary of Repsol YPF S.A., the direct owner of 98.99% of the capital stock of YPF S.A. Repsol YPF S.A. is an integrated oil and gas company which is engaged in all areas of the oil business, including exploration, development and production of crude oil and production of natural gas, crude oil transportation, refining of crude oil, production of crude oil by-products and marketing of crude oil, crude oil by-products, petrochemicals and liquid petroleum gas.

Shareholders Agreement

The holders of Gas Argentino's common shares are parties to a Shareholders Agreement, or the "Shareholders Agreement," which provides that certain majorities and voting percentages must be obtained before Gas Argentino may take certain specified actions or cause us to take such actions, including: amending our By-Laws, the By-laws of Gas Argentino, our license or the Technical Assistance Agreement; providing for new capital increases, contributions or reductions; approving corporate reorganizations; undertaking acquisitions or joint ventures; entering into new businesses other than gas distribution; and entering into sales or leases of assets, extensions of credit, borrowings and other contractual obligations that are in excess of a monetary threshold specified in the Shareholders Agreement.

The Shareholders Agreement provides a right of first refusal in favor of one shareholder of Gas Argentino if the other shareholder wishes to dispose of its common shares in Gas Argentino whereby the non-selling shareholder has the right to purchase the offered shares.

Shares Held and Number of Record Holders in Host Country

The number of shares of each class of our stock held by shareholders in Argentina and other countries outside Argentina as of December 31, 2010 was as follows:

Country	Class	Amount
Argentina	A	290,277,316(a)
	B	169,156,200(b)
	C	56,917,121
Other countries	B	52,820,571

Notes:

(a) Held by Gas Argentino.

(b) 108,142,529 of these Class B shares are held by Gas Argentino.

As of December 31, 2010, we had 1,177 record holders of our stock in Argentina and 16 in other countries.

Related Party Transactions

BG Group, through BG Inversiones Argentinas S.A., indirectly owns 54.67% of the capital stock of Gas Argentino, our principal shareholder. In accordance with our license, we had a Technical Assistance Agreement with BG Group as Technical Operator and we were required to pay an annual management fee for its services thereunder. We accrued fees of approximately Ps. 9.0 million under the Technical Assistance Agreement during the year ended December 31, 2008. See Item 4: "Information on the Company-Business Overview-Agreements with BG Group-Technical Assistance Agreement."

In addition, we reimbursed BG Group and its subsidiaries approximately Ps. 1.9 million and Ps. 2.1 million for salaries, expenses and other costs associated with the placement of BG Group managers with us during the years ended December 31, 2009 and 2008, respectively, under the terms of a Personnel Supply Agreement between us and BG Argentina. As of December 31, 2010 and 2009, we also accrued fees for salaries, expenses and other costs with YPF S.A. of approximately Ps. 0.8 million and Ps. 0.4 million, respectively.

YPF Inversora Energetica S.A. indirectly owns 45.33% of the capital stock of Gas Argentino, our principal shareholder. We have purchased gas from YPF S.A. (a related party of YPF Inversora) in the ordinary course of our business. We accrued approximately Ps. 98.8 million, Ps. 102.1 million and Ps. 82.4 million of gas purchases to YPF S.A. during the years ended December 31, 2010, 2009 and 2008, respectively. Additionally, MetroENERGÍA collected commissions for sales on behalf of YPF of approximately Ps. 0.6 million, Ps. 1.6 million and Ps. 1.4 million during 2010, 2009 and 2008 respectively.

Under the Gas Act and Decree No. 1,738/92, any individual or group producer of gas that is a controlling shareholder of Gas Argentino is prohibited from supplying (either directly or indirectly through other producers or resellers) more than 20% of the gas purchased by us in any given month. BG Group is not a gas producer in Argentina. In addition, we are prohibited from giving any of Gas Argentino's shareholders preferential treatment. Our management has managed and intends to continue managing our gas purchases and the other aspects of our business so as not to violate any such prohibitions.

Additionally, as of December 31, 2010, 2009 and 2008, we supplied gas transportation and distribution services to Astra Evangelista S.A., indirectly related to YPF S.A., for approximately Ps. 0.05 million, Ps. 0.03 million and Ps. 0.05 million, respectively and to Y.P.F. for approximately Ps. 0.01 million, Ps. 0.02 million and Ps. 0.02 million as of December 31, 2010, 2009 and 2008, respectively.

We supplied gas and transportation and distribution services of approximately Ps. 1.0 million, Ps. 1.3 million and Ps. 1.2 million during the years ended December 31, 2010, 2009 and 2008, respectively, to Operadora de Estaciones de Servicio S.A., a company directly related to YPF S.A.

We sold transportation services amounting to approximately Ps. 14.3 million, Ps. 4.9 million and Ps. 0.8 million during the years ended December 31, 2010, 2009 and 2008, respectively, to MetroENERGÍA S.A., our subsidiary.

Additionally, we receivedfees of approximately Ps. 6.6 million, Ps. 5.5 million and Ps. 4.2 million during the years ended December 31, 2010, 2009 and 2008, respectively, according to the Professional Service Agreement between MetroENERGÍA and us for the provision of administrative, accounting, tax, financial, legal and all other services related to the normal development of MetroENERGÍA's operations.

Our management believes that all our transactions with related parties were negotiated on an arm's-length basis and contain terms no less favorable to us than we could have obtained in transactions with unrelated parties.

For further information regarding certain transactions with related parties, see Note 7 to our Annual Consolidated Financial Statements.

Interests of Experts and Counsel

Not Applicable.

FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

Our Annual Consolidated Financial Statements are filed as part of this annual report.

Legal Proceedings

Study, Revision and Inspection of Works in Public Space Levy

Our license provides that we shall be entitled to occupy and use free of charge all streets, avenues, parks, bridges, roads and other public space, including underground areas and airspace, required to install facilities for our licensed service, including communication lines and interconnections to third parties. The regulatory framework also establishes that cost variations resulting from changes in taxation rules shall be passed through to our customers in the form of tariffs.

From 2000 onwards, the GCBA included in its budget a study, revision and inspection of works in public spaces levy, applicable (among others) to gas pipelines. Such revision led to unilateral tax increases by the GCBA against public companies, despite the fact that MetroGAS and several other public service companies had signed an agreement with the GCBA for no such tax increases.

GCBA has made various claims against us with respect to the Inspection Rate, always rejecting our position of double taxation. As of March 31, 2007, the GCBA alleged that we owe approximately Ps. 28.7 million (including interests, fines and legal fees) for the fiscal periods encompassing February 2000 to December 2003. Once our administrative appeals were exhausted, the GCBA initiated judicial actions to enforce payment of the amounts claimed. On October 19, 2005, we were notified of a tax levy filed by the GCBA amounting to approximately Ps. 8.5 million. We filed a response based on incorrect data included in the instrument received. On March 15, 2006, we were notified of the resolution of the Court rejecting our response and ordering the continuation of the executory proceeding. We appealed such decision but it was confirmed by the Court of Appeals and the Supreme Court of Justice of the City of Buenos Aires.

Consequently, our accounts held by HSBC amounting to Ps. 11.9 million were attached. On April 30, 2007, we agreed in writing with the GCBA Attorneys Office to pay Ps. 3.1 million in legal fees in five consecutive and monthly installments, beginning on May 4, 2007. On May 7, 2007, MetroGAS and the GCBA notified the judge that MetroGAS (i) agreed to pay Ps. 11.9 million corresponding to the tax levy and Ps. 3.1 million in legal fees, and (ii) requested a payment plan for the remaining Ps. 13.7 million owed for the period from February 1, 2000 to December 31, 2006. In 2007, MetroGAS agreed on said payment plan with the GCBA.

Since then, we have pursued our claims with ENARGAS to resolve the matter quickly and pass-through the rate imposed by the GCBA to consumers. On March 7, 2008, MetroGAS requested that ENARGAS transfer this levy to our tariffs. On November 7, 2009, MetroGAS asked for a status hearing on the relevant file, No. 12,626.

On January 21, 2009, ENARGAS approved our file and submitted it to the MPFIPS pursuant to Note No. ENRG/GDYE/GAL/I 712 and MPFIPS Resolution No. 2,000/05. The latter establishes that the Undersecretary of Coordination and Management Control of the MPFIPS must approve any administrative decision related to the transfer of the levy surcharges to our tariffs. On March 10, 2009 and again on May 21, 2009, MetroGAS requested an immediate review of our file by the Undersecretary of Coordination and Management Control of the MPFIPS.

On August 27, 2009, MetroGAS began two legal proceedings against the Undersecretary of Coordination and Management Control and on September 9, 2009, MetroGAS began five legal proceedings against ENARGAS. The aforementioned proceedings were initiated because we have not been allowed to pass-through to our tariffs amounts owed under the study, revision and inspection of works in public spaces levy and the occupancy of public space levy of the GCBA. To date, these claims are still pending. MetroGAS' argument in these cases is that our license authorizes us to occupy public property without charge for the purpose of rendering our licensed service and, if a charge is levied by a provincial or municipal authority, we are allowed to add a surcharge to the relevant tariffs to recover our added costs. In turn, MetroGAS has recorded a credit in an amount totaling Ps. 74.1 million and Ps. 65.8 million to cover these surcharges (and other related surcharges based on levies issued by other municipalities as described below) under the "Other non-current receivables" line item of our balance sheet at December 31, 2009 and 2008, respectively.

Our actions are supported by "Gas Natural BAN c/ Municipalidad de Campana y Litoral Gas c/ Municipalidad de Villa Constitución s/ Acción meramente declarativa", a ruling of the Argentine Supreme Court of Justice. The ruling states that Article 9.6.2 of Executive Decree No. 2,255/92 stipulates that cost variations caused by changes in tax regulations must be added to tariffs in accordance with Article 41 of Law No. 24,076.

Pursuant to these legal precedents, laws and resolutions, we believe these credits are recoverable.

Right of Occupancy and Use of Public Spaces Levy

Government of the Autonomous City of Buenos Aires

In 1998, the GCBA created an occupancy of public space levy, applicable (among others) to gas pipelines, which was included in the city's annual budgets. That levy has been objected to by several public service companies.

Since 2003, the GCBA has demanded from us the payment of the occupancy of public space levy. We duly filed several administrative appeals before the administrative office against such demands.

On September 22, 2004, the GCBA notified us of the rejection of those administrative appeals, therefore ending the administrative proceedings and demanding the payment of the levy. Consequently, on February 28, 2005 we filed before the lower court of the GCBA, an action under administrative law requesting, among other things, precautionary measures against the decision taken by the GCBA on September 22, 2004.

On February 2, 2005, a note with copy to ENARGAS and UNIREN was sent to the Energy Secretariat requesting the immediate action of transferring the tax to the tariff. In April 2005, the General Department of Legal Affairs of the Ministry of Economy pronounced itself in favor of the reallocation of tariffs, sending the file to ENARGAS so as to have a final resolution on this matter.

During 2005, after the notification of the payment received, we executed an agreement with the GCBA, which established a payment plan in order to cancel the debt corresponding to the period between January 1, 1998 and December 31, 2004. As of the date of this annual report, we are paying both the payment plan and quarterly installments on a regular basis.

On March 6, 2006, we sent a note to ENARGAS reporting our adherence to said payment facilitation plans and requesting once again the reallocation of tariffs. This note was reaffirmed in a March 29, 2006 note to ENARGAS. On April 28, 2006, we requested from ENARGAS a prompt reply to our request. On July 11, 2006, we sent a second note requesting the reallocation on tariffs, sending the payment slips from the payment facilitation plan's second and third paid installments.

On November 28, 2006, ENARGAS asked for all information and documentation in order to evaluate the impact resulting from the transfer to tariffs on customers within the Autonomous City of Buenos Aires. On December 1, 2006, we responded with the requested materials. On January 30, 2007, we followed up, requesting that ENARGAS confirm that we had filed all the necessary information for ENARGAS to decide whether to grant the pass-through. We believed that the information sent to ENARGAS conformed with Article No. 41 of the Law No. 24,076 and Article No. 9.6.2 of the Distribution License Basic Rules. In turn, ENARGAS had a duty to consider all information or proof of documents, which we had submitted.

On January 7, 2008, MetroGAS requested a status hearing of our file, No. 9,005. Any payments made to the GCBA were reported to ENARGAS with a concurrent request for the transfer of such payments to our tariffs. On August 12, 2008, ENARGAS approved our file and submitted it to the MPFIPS pursuant to MPFIPS Resolution No. 2,000/05. On March 10, 2009 and again on May 21, 2009, MetroGAS requested an immediate review of our file by the Undersecretary of Coordination and Management Control of the MPFIPS.

On August 27, 2009, MetroGAS filed a legal proceeding for payment in arrears against the Undersecretary of Coordination and Management Control for its failure to allow us to pass-through to our tariffs amounts owed under the occupancy of public space levy of the GCBA. To date, this claim is still pending. As stated above, MetroGAS' argument is that our license authorizes us to occupy public property without charge for the purpose of rendering our licensed service and, if a charge is levied by a provincial or municipal authority, we are allowed to add a surcharge to the relevant tariffs to recover our added costs.

Municipality of Esteban Echeverría

Through Resolution No. 113/05, dated February 7, 2005, the Municipality of Esteban Echeverría claimed for Ps. 6.6 million (incidental expenses included) concerning the right to occupancy of public spaces corresponding to the period from 2000 to 2004. On February 18, 2005, we rejected the imposition of such rate on the grounds that the claim is against federal law, which is hierarchically superior to Municipal law.

After several rejections of our arguments by the Municipality, on March 10, 2006, we entered into a letter of intent with such Municipality to reach an agreement regarding the indebted amounts. On March 30, 2006, the first quarter installment from 2006 was paid and as from that date all of the period's installments were regularly paid.

In May 2006, a request to transfer this levy to tariffs was sent to ENARGAS and in July of the same year, a quick response was demanded.

On June 30, 2006, we received a note, by which the Municipality notified us of our incurred debt through December 31, 2005 and offered us two payment alternatives. On July 10, 2006, we sent a note (which included copy of the Municipality's letter) to ENARGAS requesting that they inform us of the course of action to take regarding the payment plans offered and also to transfer any payments made to tariffs.

On December 19, 2006, knowing that the Municipality was about to start legal actions to collect the indebted amount and to avoid any setback in rendering our services, we adhered to a payment plan, which consists of paying the amounts claimed from the period 2000 to 2005 in four installments. As of the date of this annual report, we have paid said installments, and are regularly paying this Municipality levy.

To date, MetroGAS continues its claim before ENARGAS for the corresponding transfer of the levy surcharges to our tariffs. On January 7, 2008, we requested a status hearing on our file, No. 10,774 and, on March 13, 2008, we once again requested the transfer of the levy surcharges to our tariffs. On January 30, 2009, upon ENARGAS' request, our plan to recover amounts paid through December 31, 2008 was sent to ENARGAS. We sent additional requests regarding the transfer of the levy surcharges to our tariffs to ENARGAS on March 9, May 29, and July 13, 2009.

On September 9, 2009, we filed a legal proceeding for payment in arrears against ENARGAS in connection with file No. 10,774/06. On October 13, 2009, ENARGAS was notified of the proceeding. As of the date of this annual report, this file remains under review.

Municipality of Almirante Brown

The Municipality of Almirante Brown claimed from an additional payment of the Right of Occupancy and Use of Public Spaces corresponding to fiscal years 2004, 2005 and 2006, considering a different taxable base, a deemed gas pipeline extension, which resulted higher than the actual one. We rejected such claim and informed the actual gas pipeline extension within the jurisdiction of the Municipality for purposes of re-assessing the claim.

In April 2007, we executed an agreement with the Municipality to formalize a payment plan for our debt, which installments have been completely canceled by us as of December 31, 2007. As of the date of this annual report, we are timely and regularly paying this Municipality levy.

On May 14, 2007, MetroGAS again requested ENARGAS to allow the transfer of the levy surcharges to our tariffs. On January 7, 2008 and again on March 13, 2008, we made requests for status hearings of our file No. 12,610. On January 30, 2009, upon ENARGAS' request, our plan to recover amounts paid through December 31, 2008 was sent to ENARGAS. We sent additional requests regarding the transfer of the levy surcharges to our tariffs to ENARGAS on May 29 and July 13, 2009.

On September 9, 2009, we filed a legal proceeding for payment in arrears against ENARGAS in connection with file No. 12,610/07. As of the date of this annual report, this file remains under review.

Municipality of Ezeiza

On September 3, 2007, the Municipality of Ezeiza requested payment by MetroGAS of the right of occupancy and use of public spaces levy for the periods 2000 to 2006.

On October 9, 2007, we executed an agreement with the Municipality through which a payment plan was established for us. As of the date of this annual report, we are timely and regularly paying this levy.

On January 30, 2009, upon ENARGAS' request, our plan to recover amounts paid through December 31, 2008 was sent to ENARGAS. We sent additional requests regarding the transfer of the levy surcharges to our tariffs to ENARGAS on March 9 and July 13, 2009.

On September 9, 2009, we filed a legal proceeding for payment in arrears against ENARGAS in connection with file No. 12,619/07. On October 7, 2009, ENARGAS was notified. On December 7, 2009, MetroGAS received a decision in its favor; ENARGAS was granted 30 business days to comply. ENARGAS appealed and submitted the case for review by the Undersecretary of Coordination and Management Control of the MPFIPS in accordance with MPFIPS Resolution No. 2,000/05. As of the date of this annual report, this file remains under review.

Municipality of Florencio Varela

On July 30, 2008, after a period of discussions between the Municipality of Florencio Varela and us about the applicability of the right of occupancy and use of public spaces levy, the Municipality formally requested our payment of an aggregate amount of Ps. 1.01 million, plus fines, corresponding to the period from 2003 to 2008. The municipal resolution stated that appropriate legal actions would be initiated by the Municipality if we did not pay the stated amount.

In order to avoid such legal actions and take advantage of an existing special payment plan, we reached and executed an agreement with the Municipality on October 2008, by which we agreed to pay an aggregate amount of Ps. 842.5 thousand in exchange for the cancellation of all existing claims under the right of occupancy and use of public spaces levy. As of the date of this annual report, we are timely and regularly paying this Municipality levy.

On January 30, 2009, we requested again that ENARGAS transfer the levy surcharges to our tariffs. We also enclosed a tentative recovery plan of amounts paid through December 31, 2008. We sent additional requests regarding the transfer of the levy surcharges to our tariffs to ENARGAS on March 9, May 29, and July 13, 2009.

On September 9, 2009, we filed a legal proceeding for payment in arrears against ENARGAS in connection with file No. 2,155/09. This file remains under review.

Municipality of Lomas de Zamora

On October 22, 2008 the Municipality of Lomas de Zamora formally requested our payment of the aggregate amount of Ps. 2.71 millions pursuant to the right of occupancy and use of public spaces levy, the health, security and hygiene levy, the publicity levy and the services levy, corresponding to the period from 2002 to 2008, without providing us any breakdown of the amounts claimed under each levy.

On November 19, 2008, we answered the municipal resolution by, (i) attaching copies of the corresponding payments of the health, security and hygiene levy, the publicity levy and the services levy and (ii) rejecting the claim under the right of occupancy and use of public spaces levy due to the fact that we consider such claim to be against federal law, which is hierarchically superior to Municipal law. As of the date of this report, we have not received any answer from the Municipality of Lomas de Zamora.

These payments are reflected under the heading "Other non current receivables" in our consolidated balance sheets at December 31, 2010 and 2009 in amounts totaling Ps. 83.2 million and Ps. 74.1 million, respectively, which relates to this case as well as payments corresponding to levies by the GCBA, the Municipality of Esteban Echeverría, the Municipality of Almirante Brown, the Municipality of Ezeiza and the Municipality of Florencio Varela. As stated above, our argument is that our license authorizes us to occupy public property without charge for the purpose of rendering our licensed service and, if a charge is levied by a provincial or municipal authority, we are allowed to add a surcharge to the relevant tariffs to recover our added costs.

Income Tax-Bad debt deduction

On November 5, 2002, the Federal Tax Authority ("AFIP") informed us of the ex-officio ruling that disallowed bad debt deductions on our income tax returns for fiscal years 1996 and 1997 and established a tax adjustment for those years of Ps. 0.9 million and Ps. 1.6 million, respectively.

The AFIP rejected the bad debt deduction, which we determined based on the following indicators:

Disappearance of the debtor as evidenced by the change of the name in which the relevant account was maintained.

Removal of the meter from the locations of customers that owed us less than Ps. 1 thousand.

AFIP's main argument to challenge the deduction is based on the fact that MetroGAS should have started legal actions to collect those debts. On November 26, 2002, we appealed the AFIP's determination to the Tax Court. Likewise, In addition to this, AFIP levied attachments on some of our fixed assets. As of December 31, 2008, the residual accounting value amounted to Ps. 16.2 million.

Subsequently, on December 3, 2002, Executive Order No. 2,442/02 was published, replacing Article No. 136 of the income tax regulations applicable to years ended after the publication date (year 2002). One of its main objectives was to decide whether multiple insignificant defaulted payments should be aggregated and allowed to be deducted as bad debts. The following requirements are established: debts remained unpaid for at least 180 days, notice of non-payment has been served on the debtor and the debtor's service has been disconnected or terminated. Furthermore, the amount should not exceed that established by AFIP. General Resolution No. 1,457 of AFIP was published on March 7, 2003, establishing the threshold amount as Ps. 1.5 thousand and on June 18, 2004, General Resolution No. 1,693 increased that amount to Ps. 5 thousand.

On February 16, 2007, Division C of the Prosecuting Court notified us of its sentence from December 7, 2006, by which the Court accepted the removal of gas meters from delayed customers as an indicator of the impossibility to collect outstanding amounts due and rejected the indicator related to the disappearance of the debtor. In both cases, and considering the nature of this matter and the amounts at issue, and in face of an excusable mistake, the Prosecuting Court annulled the fine applied to us. AFIP desisted the appellation recourse against the decision of the Prosecuting Court that reversed the AFIP's determination respect to removing of the meter from the location of customers that owed us less than Ps. 1 thousand.

The Prosecuting Court ordered that AFIP perform a reassessment of income taxes and compensatory interests in accordance with the established criteria. On August 8, 2007 AFIP notified us of the reassessment. Such reassessment did not consider AFIP General Instruction No. 2/07, issued on March 15, 2007, which allows the deduction of credits of up to Ps. 1.5 thousand by non-competitive markets' utilities companies. We submitted different filings before the Prosecuting Court to request a new reassessment considering the abovementioned General Instruction. As of the date of this annual report, the Prosecuting Court has not issued a decision in this matter. Once the reassessment becomes definitive, the parties may appeal before the Court of Appeals within the period ascribed for such actions. However, the process to appeal requires us to pay the claimed taxes, which would be reimbursed to us upon a favorable judicial decision. Consequently, to cover this contingency, we maintain a provision for an estimated amount of Ps. 0.1 million until the definitive reassessment will be issued by the AFIP.

As of the date of this annual report, the Prosecuting Court had not issued a decision. Therefore, on March 6, 2009, MetroGAS' Board of Directors decided to issue a payment plan pursuant to Law No. 26,476. Such payment plan was entered into on April 27, 2009 and consists of 120 equal payments totaling Ps. 1.6 million in the aggregate plus an annual interest of 9%. In April 2009, MetroGAS recorded an amount of Ps. 1.5 million relating to this payment plan, which was included in MetroGAS' reorganization procedure (concurso preventivo).

Turnover tax (Province of Buenos Aires) - Rate increase & differences in the assessment of the taxable base

During 1994, the Province of Buenos Aires agreed with the Argentine Government that the Province would not impose turnover taxes on sales of natural gas at a rate in excess of 3.5% of the invoice prices of those sales. Notwithstanding the above, the Province imposed turnover taxes on sales of natural gas at a higher rate and instructed us to include turnover taxes at the higher rate in our invoices to our customers and to remit the taxes so collected to the Province. We declined to follow those instructions, citing the agreement between the Province and the Argentine Government described above.

In July 2003, the Province, by means of a pre-view, requested the payment of amounts that would have been perceived from our customers if the mentioned rate increase had been applied in the invoices (amounting to approximately Ps. 10.5 million, including interest and fines, as of the date of this annual report). This claim was duly rejected by us. On October 12, 2005, the Tax Authority of the Province of Buenos Aires notified us of their commencement of a determination procedure through Resolution No. 465/05. On December 22, 2005, according to Resolution No. 907/05, the determination procedure was closed and we were ordered to pay the debt. The latter Resolution was appealed on January 16, 2006 before the Tax Court of the Province of Buenos Aires, and is pending resolution at the date of this annual report. The Province claims that we should have paid this increase (from 3% to 3.75%), which never took place.

On September 27, 2006, theComisión Federal de Impuestos (Federal Tax Commission), through Resolution No. 112/06, ratified the criterion followed by us and rejected a motion of revision filed by the Province of Buenos Aires that analyzes a situation identical to ours. Against such judgment, the Province of Buenos Aires filed and extraordinary motion of revision to be decided by the Federal Supreme Court of Justice. That extraordinary motion was granted and, as of the date of this annual report, remains pending decision by the Federal Supreme Court of Justice.

In March 2008, through Resolutions No. 95/08, 96/08 and 97/08, the Tax Authority of the Province of Buenos Aires notified us of three additional assessments for the period from January 2004 to October 2005 in an aggregate amount of approximately Ps. 20 million, including interest and fines. These claims are based on almost equal proportions to the above described increased tax rate, with certain differences upon assessing the corresponding taxable base (derived mainly from the liquids' processing business). On March 27, 2008 we appealed these resolutions before the Tax Court of the Province of Buenos Aires.

In the event that we are finally compelled to pay the turnover tax differences corresponding to the increased tax rate, it will request the pass-through of such rate increase to the tariffs paid by customers in compliance with the terms of the license.

As of December 31, 2010, we maintained an allowance of Ps. 16.7 million to cover the contingency related to the difference in the determination of the income and expenses rate.

Government of the City of Buenos Aires - Works on public roadways

On January 25, 2008, pursuant to Law No. 2,634 and Regulation Decree No. 238/08 published on March 28, 2008, the City of Buenos Aires created a new regime for regulating public roadways. The regime specifies charges required to be paid for works in public spaces and sets forth that closing works must be made by GCBA. Since November 1, 2009, the GCBA once again modified the procedure to repair sidewalks and stated that those companies which made holes in sidewalks have to repair them.

The GCBA's Control of Special Misdemeanors Agency sanctioned MetroGAS for several reasons. As of December 31, 2009, the Company is dismissing these administrative infractions and has sought a judicial determination that the law is unconstitutional and the fines are unreasonable. As of December 31, 2010, the Company has registered an allowance of Ps. 2.4 million related to these charges.

Rates and charges

Through Resolution No. 2,778/03, ENARGAS stated that we had collected excessive rates and charges from our customers amounting to Ps. 3.8 million and stipulated a fine of Ps. 0.5 million. We duly filed an appeal for reconsideration with a subsidy appeal against the mentioned Resolution and against the interest rate applied on the fine. The total amount demanded by ENARGAS amounted to Ps. 22.3 million, including interests and fines, which was recorded as a provision as of December 31, 2010.

Interpretation disagreements with the regulatory authority

As of the date of this annual report, there are several disagreements between the Company and the pertinent regulatory authorities as to the interpretation of various legal issues. As of December 31, 2010, the Company has registered an allowance of Ps. 9.2 million related to the effects of these disagreements.

Executory proceedings

As of the date of this annual report, there are no outstanding executory proceedings started by holders of Negotiable Bonds.

Dividend Policy

We do not have a formal policy governing the amount and payment of dividends. However, we paid dividends regularly until November 15, 2001. The amount and payment of dividends are determined by majority vote of our shareholders and the recommendation of our Board of Directors.

Dividends may be lawfully declared and paid only out of our retained earnings reflected in our annual financial statements and approved by a shareholders' meeting as described below. Our Board of Directors may declare an interim dividend, in which case each member of the Board of Directors is jointly and severally liable for the repayment of the dividend if retained earnings at the close of the fiscal year in which the dividend was paid would not have been sufficient to permit the payment of the dividend.

Since Gas Argentino owns 70% of our capital stock, it has and will continue to have the discretion to determine the amount and payment of future dividends. The payment of future dividends will also depend on our earnings, financial condition and other factors, including the requirements of Argentine law. All our shares of capital stock rank pari passu with respect to the payment of dividends. BG Argentina and YPF, as minor shareholders of MetroENERGÍA, have renounced any dividend collection as long as we restructure and pay our financial debt.

We have not paid dividends for any of the years ended December 31, 2003 through December 31, 2010.

Our Board of Directors proposed to ratify an interim dividend payment for 2001. Taking into consideration that the distributed interim dividend constitutes a dividend paid in advance of net income for the year 2001, we transferred the balance not absorbed by unappropriated retained earnings as a credit in our favor, to be balanced with future earnings. The Shareholders' Meeting held on April 30, 2002, ratified the interim cash dividend and the above mentioned proposal of the Board of Directors.

Our Board of Directors submits our financial statements for the preceding fiscal year, together with reports thereon by the Supervisory Committee, to the annual ordinary shareholders' meeting for approval. Prior to April 30 of each fiscal year, an ordinary shareholders' meeting must be called to approve the financial statements and determine the allocation of our net income for the preceding fiscal year. Under Argentine law, shareholders are required to allocate not less than 5% of net income per year to the legal reserve until the amount of the reserve equals 20% of our subscribed capital stock plus adjustments to capital stock. If the legal reserve is subsequently reduced, dividends may not be paid until the legal reserve has been restored to its former level. The legal reserve is not available for distribution. As of December 31, 2008, our legal reserve represented 3.6% of our subscribed capital stock, as adjusted. Under our By-Laws, after an allocation to the legal reserve has been made, amounts will be segregated as follows: (i) to pay the fees of the members of our Board of Directors and of the Supervisory Committee; (ii) if any preferred stock is then outstanding (we currently have no preferred stock outstanding), to pay dividends on preferred stock; (iii) to pay a profit sharing bonus to all our employees; (iv) to retain as a voluntary reserve or contingency reserve as determined by the shareholders; and (v) the remainder of the retained earnings for the year may be distributed as dividends on capital stock.

On November 6, 2002, our Board of Directors approved a legal reserve of up to Ps. 3.0 million (adjusted for inflation as of February 28, 2003), which represents 5% of our 2001 net income of Ps. 60.3 million (adjusted for inflation as of February 28, 2003). As the unappropriated retained earnings could not absorb the legal reserve, and, as described above, in view of the fact that the interim dividend distributed constitutes a dividend paid in advance of net income for the year 2001, the Board of Directors approved the transfer of the balance not absorbed by unappropriated retained earnings as a credit in our favor, to be balanced with future earnings. The ordinary and extraordinary shareholders meeting held on April 29, 2003 ratified this action.

Our capacity to pay dividends to our shareholders is restricted by the agreement we reached as part of our recent restructuring process. We cannot distribute dividends until December 31, 2012 and, even then, only if we have repaid at least US$ 75 million of our outstanding debt. Therefore, our ability to pay dividends is currently limited by our debt rate as defined in our restructuring contract.

Dividends on ADSs

To the extent that we declare and pay dividends on our common stock, owners of the American Depositary Shares, or "ADSs," on the relevant record date will be entitled to receive any dividends on the Class B Shares underlying the ADSs, subject to the terms of the deposit agreement. Cash dividends paid to the depositary in Pesos will be converted by the depositary into U.S. Dollars and paid to owners of ADSs net of dividend distribution fees and currency conversion expenses, except as otherwise described below. Dividends paid to owners of ADSs are currently exempt from withholding or other Argentine taxes. See Item 10: "Additional Information-Taxation-Argentine Taxes."

To the extent that the depositary can, in its judgment, convert Pesos (or any successor or other foreign currency) into U.S. Dollars on a reasonable basis and transfer the resulting U.S. Dollars to the United States, the depositary is required under the deposit agreement to convert or cause to be converted all cash dividends and other cash distributions received by it on the Class B Shares into U.S. Dollars and to distribute the resulting U.S. Dollars, after deduction or upon payment of the fees and expenses of the depositary and without liability for interest, to the Holders of ADSs in proportion to the number of ADSs representing such Class B Shares held by each of them. The amounts distributed will be reduced by any amounts required to be withheld by us, the depositary or the custodian of the depositary in Argentina, or the "Custodian," on account of taxes or other governmental fees or charges. If the depositary determines that, in its judgment, any foreign currency received by it cannot be so converted on a reasonable basis, the depositary may distribute the foreign currency received by it to, or in its discretion hold such foreign currency for the respective accounts of, the holders of ADSs entitled to receive it.

If a distribution by us consists of a dividend in, or a free distribution of, Class B Shares, upon receipt by or on behalf of the depositary of additional Class B Shares from us, the depositary may, and shall if we so request, distribute to the holders of ADSs, in proportion to their holdings, additional ADRs for an aggregate number of ADSs representing the number of Class B Shares received as such dividend or distribution, but only after deduction or payment of the fees and expenses of the depositary. If additional American Depositary Receipts, or "ADRs," are not so issued, each ADR shall thereafter also represent the additional ADSs with respect to the Class B Shares so distributed. If for any reason the depositary reasonably believes such distribution is not feasible, the depositary may, with our consent, adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including the advance payment of any taxes or governmental charges or the sale (at public or private sale) of the Class B Shares thus received, or any part thereof, and the net proceeds of any such sale shall be distributed by the depositary to the Holders of ADSs entitled thereto as in the case of a distribution received in cash. In lieu of issuing ADRs for fractions of ADSs, in any such case, the depositary will sell the number of Class B Shares represented by the aggregate of such fractions and distribute the net proceeds in U.S. Dollars, all in the manner and subject to the conditions set forth in the Deposit Agreement.

For a discussion of U.S. and Argentine tax consequences with respect to the payment of dividends, see Item 10: "Additional Information-Taxation."

THE OFFER AND LISTING

Offer and Listing Details

New York Stock Exchange

American Depositary Shares

Our ADSs, each representing 10 of our Class B Shares, were listed on the New York Stock Exchange ("NYSE") under the trading symbol "MGS" until June 17, 2010. The ADSs began trading on the NYSE on November 17, 1994 and were issued initially by Citibank, N.A., as depositary. Citibank, N.A. was replaced as depositary by The Bank of New York Mellon (the "Depositary") on February 26, 2001. The following table sets forth, for the periods indicated, the high and low closing sales price in U.S. Dollars of the ADSs on the NYSE:

	High	Low

2005:	6.18	4.00
2006:	4.42	3.20
2007:	6.20	3.70
2008:	4.62	0.90
2009	2.68	1.09
Between January 2 and June 17, 2010^(*)	2.50	1.50

2009:
First Quarter	1.90	1.09
Second Quarter	1.90	1.20
Third Quarter	2.55	1.49
Fourth Quarter	2.68	1.63

2010:
First Quarter	2.50	1.84
Second Quarter	2.22	1.50

Notes:

(*) On June 17, 2010, we received a notice from the NYSE that our ADSs had been suspended from trading on the NYSE and was de-listed as a result of our filing for voluntary reorganization. See Item 3: "Key information-Risk Factors-Risk Factor Relating to Us-Our ADSs have been suspended from trading and was de-listed from the New York Stock Exchange."

Class B Shares

The Class B Shares are listed on the BCBA under the trading symbol "METR." The Class B Shares began trading on the BCBA on November 17, 1994. The following table sets forth, for the periods indicated, the high and low closing sales price in Pesos of the Class B Shares on the BCBA:

	High	Low

2005:	1.74	1.19
2006:	1.41	0.99
2007:	1.89	1.24
2008:	1.42	0.43
2009:	0.97	0.44
2010:	1.18	0.59

2009:
First Quarter	0.56	0.44
Second Quarter	0.66	0.48
Third Quarter	0.95	0.61
Fourth Quarter	0.97	0.65

2010:
First Quarter	0.92	0.72
Second Quarter	0.82	0.60
Third Quarter	0.71	0.59
Fourth Quarter	1.18	0.68

Recent Six Months
November 2010	1.16	0.80
December 2010	1.18	1.04
January 2011	1.38	1.06
February 2011	1.31	1.10
March 2011	1.38	1.03
April 25, 2011	1.10	1.02

On December 31, 2010, the last reported sale price of the Class B Shares on the BCBA was Ps. 1.16 per share. On December 31, 2010, there were approximately 1,177 holders of Class B Shares in Argentina.

Plan of Distribution

Not Applicable.

Markets

The Argentine Securities Market

There are eleven securities exchanges in Argentina, six of which have affiliated stock markets and are authorized to quote publicly offered securities: Buenos Aires, Rosario, Cordoba, Mendoza, Santa Fe and La Rioja. The oldest and largest of these exchanges is the BCBA, founded in 1854. Total trading volume in the equity securities of Argentine companies as of December 31, 2010 was approximately US$ 44.1 billion, which was concentrated in the shares of a small number of companies. As of December 31, 2010, the market capitalization of shares of the 98 companies (excluding mutual funds) listed on the BCBA was approximately US$ 477.8 billion compared to US$ 575.0 billion on December 31, 2009. Trading in securities listed on an exchange is conducted through the brokers of the Mercado de Valores de Buenos Aires S.A., or the "Buenos Aires Stock Market," affiliated with such exchange.

Securities may also be listed and traded through over-the-counter market brokers who must be linked to an electronic reporting system. The activities of such brokers are controlled and regulated by the Mercado Abierto Electronico S.A., or the "MAE" or by the "OTC Market," an electronic over-the-counter market reporting system that functions independently from the Buenos Aires Stock Market and the BCBA. Pursuant to an agreement between the BCBA and certain members of the MAE, trading in equity and equity-related securities is conducted exclusively on the BCBA and trading in Argentine Government and corporate debt securities, which are not covered by the agreement, may be conducted on either or both of the BCBA and the MAE. The agreement does not extend to other Argentine exchanges.

The CNV has passed a set of resolutions establishing a system of self-regulating entities under which each exchange and the MAE are responsible for developing and implementing regulations establishing regulations for listing securities, admitting brokers, conducting trades and controlling the truthfulness of any information which is required to be reported in connection therewith, subject to the approval and oversight of the CNV.

The Buenos Aires Stock Market

The Buenos Aires Stock Market, which is affiliated with the BCBA, is the largest stock market in Argentina. The Buenos Aires Stock Market is a corporation whose shareholders are the only individuals and entities authorized to trade in the securities listed on the BCBA. The BCBA is a self-regulated, non-profit civil association representing all sectors of Argentina's economy. The most important index of the stock market is the MERVAL (MERcado de VALores, "stock market").

Trading on the BCBA is conducted by continuous open outcry, or the traditional auction system, from 11:00 a.m. to 5:00 p.m. each business day of the year. Trading on the BCBA is also conducted through SINAC. SINAC is an electronic trading system that permits trading in debt securities and equity securities from 11:00 a.m. to 5:00 p.m. each business day of the year.

In order to control price volatility on the BCBA, the Buenos Aires Stock Market operates a system which suspends dealing in shares of a particular issuer for 15 minutes when changes in the price of such issuer's shares registers a variation on its price between 10% and 15% and between 15% and 20%. After a 20% variation, if the price of such issuer's shares varies an additional 5% in the same day, the dealwill result in additional 10-minute, successive suspension periods. Trading in such shares resumes the next trading day.

Certain information regarding the Argentine securities market is set forth in the table below:

	2010	2009	2008	2007	2006

Market capitalization (US$ billions)	477.9	575.0	357.3	563.0	401.5
Annual volume (US $ millions)	44,150	34,530	68,710	66,990	49,200
Average daily trading volume (US$ millions)	14.3	14.3	28.0	28.5	21.4
Number of listed companies	98	101	104	102	96

Source: BCBA.

The New York Stock Market

The New York Stock Exchange traces its origins to 1792, when 24 New York City stockbrokers and merchants signed the Buttonwood Agreement. This agreement set in motion the NYSE's unwavering commitment to investors and issuers. NYSE Euronext, the holding company created by the combination of NYSE Group, Inc. and Euronext N.V., was launched on April 4, 2007. NYSE Euronext (NYSE/New York and Euronext/Paris: NYX) operates the world ' s largest and most liquid exchange group and offers the most diverse array of financial products and services. NYSE Euronext, which brings together six cash equities exchanges in five countries and six derivatives exchanges, is a world leader for listings, trading in cash equities, equity and interest rate derivatives, bonds and the distribution of market data. NYSE Euronext is a leading provider of securities listing, trading and market data products and services. To protect investors, the health of the financial system, and the integrity of the capital-formation process, the SEC has designated the NYSE as the examining authority for its members and member firms. Listed companies, individual investors, institutional investors and member firms, create the NYSE market. A member organization is a registered broker-dealer organized as a corporation, a partnership or an LLC, which is regulated by the Exchange. A member organization may, or may not, hold a trading license. At the NYSE, two types of members work on the Trading Floor, each playing a distinct role in the trade execution process: Floor Brokers and Specialists. The New York Stock Exchange is open from Monday through Friday 9:30 a.m. to 4:00 p.m. EST each business day of the year.

On June 19, 2008, the NYSE Regulation, Inc. announced that "eGovDirect.com" was being offered to non-U.S. foreign private issuers listed on the New York Stock Exchange, including companies that trade American Depositary Shares on the NYSE through their Depositary Bank. This password-protected website assists NYSE-listed companies to meet their corporate governance and compliance requirements and allows issuers to save time and resources by filing annual and interim financial reports, disclosing officer and audit committee member information, and publishing declarations of dividends, shareholder meeting dates, shares outstanding and press releases through this website.

On January 29, 2009,NYSE Euronext and BIDS Holdings, L.P., launched a joint venture, the New York Block Exchange ("NYBX"), an innovative new platform designed to maximize access to liquidity and improve execution quality in the U.S. equity block trading market. Institutional investors and other market participants can execute block trades on NYBX, the first venue of its kind to allow non-displayed liquidity to anonymously access both the displayed and reserve liquidity of the NYSE order book, creating an innovative platform to re-aggregate blocks of stock. BIDS Holdings and the NYSE Euronext each have a 50% ownership stake in NYBX.

On November 12, 2009, NYSE Euronext established its commission on corporate governance to address U.S. corporate governance and the overall proxy process. Consistent with the NYSE's role as a leading advocate on governance issues, the commission brings together leading experts and representatives from public companies, institutional and individual investors, broker/dealers and other advisors.

Selling Shareholders

Not Applicable.

Dilution

Not Applicable.

Expenses of the Issue

Not Applicable.

ADDITIONAL INFORMATION

Share Capital

As of the date of this annual report, our capital stock amounted to Ps. 569,171,208, all of which is fully subscribed, registered and paid-in.

Our shares are comprised of three classes of common stock par value $1 per share: (1) Class A shares representing 51% of our capital stock, (2) Class B shares representing 39% of our capital stock and (3) Class C shares representing 10% of our capital stock. See Item 9: "-Memorandum and Articles of Association-Corporate Governance."

Composition of Capital Stock

Classes of shares	Subscribed, registered and paid-in in Thousand of Pesos
Ordinary certified shares of Ps. 1 par value and 1 vote each
Class A	290,277
Class B	221,977
Class C	56,917
Capital stock as of December 31, 2010	569,171

Memorandum and Articles of Association

Our By-Laws were registered in the Inspeccion General de Justicia, or the General Board of Corporations, on December 1, 1992 under number 11670, book 112, volume A of Corporations. The last modification of our By-Laws was approved on July 29, 2005, and was registered in the Inspeccion General de Justicia under number 11,027, book 29 of Corporations.

Corporate Object and Purpose

Article 4 of our By-Laws states that our purpose is to provide the public service of gas distribution either by ourselves, through third parties or in association with third parties in Argentina. To that end, we may carry out all complementary and subsidiary activities related thereto, with full legal capacity to acquire rights, undertake obligations and exercise mandates and commissions, render gas pipeline maintenance and technical advisory services, construction works and other activities related to natural gas distribution. We may also carry out any type of financial transactions in general, except for those specified in the Financial Entities Act, and organize and participate in corporations by investing capital.

Provisions of the By-laws and Argentine Law Relating to Directors

Under Argentine law, directors of a company have a duty, among others: (1) to reveal any conflict of interest to the board of directors and Supervisory Committee; (2) to abstain from voting in any deliberation related to such conflict; and (3) to refrain from competition with us unless authorized by a shareholders' meeting to do so. Directors are jointly and severally liable for the negligent performance of their duties, or for violations of the law or of our By-Laws or regulations.

Article 30 of the By-Laws provides that the shareholders' meeting shall fix the compensation of the members of the Board of Directors.

Article 6 of our By-Laws provides that any issuance of ordinary shares for future stock increases shall be carried out in the proportion of 51% of Class A shares and 49% of Class B plus Class C shares, maintaining between these two classes the same relation that existed at the date of the relevant issuance.

Article 11 of the By-Laws provides that ordinary shares Class A will only be transferred with the previous authorization of ENARGAS.

Corporate Governance

We are principally governed by three separate bodies: our shareholders' meeting, our Supervisory Committee, and our Board of Directors. Also, to comply with Argentine Decree No. 677/01 and applicable CNV Resolutions, the Board of Directors approved the Statute for the Audit Committee. You may access our corporate governance guidelines at www.metrogas.com.ar. Copies of any such corporate governance guidelines and charters will be available to any shareholder upon request. On May 7, 2004, our Board of Directors established an Audit Committee consisting of three directors. The roles of these bodies are defined by Argentine law and our By-Laws, and may be described generally as follows:

Shareholders' Meetings and Voting Rights

Under Argentine law, shareholders' meetings are called in such manner as prescribed by applicable legislation, notwithstanding provisions for unanimous meetings. First call and second call ordinary meetings and special class meetings may be called simultaneously.

Each common share entitles its holder to one vote. Under Argentine law, meetings of shareholders must be held in a place that corresponds with our jurisdiction. Shareholders' resolutions are subject to Argentine law and the By-Laws are binding on all of the shareholders, although shareholders are given the right of withdrawal in connection with certain shareholder decisions.

Shareholders meetings may be ordinary or extraordinary. At ordinary shareholders' meetings, shareholders consider and resolve the following matters:

approval of accounting and other measures connected with the conduct of our business in accordance with the law or the By-Laws, as submitted to the shareholders by the Board of Directors or the Supervisory Committee;

election or removal of directors or members of the Supervisory Committee, and fixing of their remuneration;

establishing the responsibilities of the directors and members of the Supervisory Committee;

approving increases in the corporate capital not exceeding five times the current amount; and

issuance of negotiable bonds, or "negotiable obligations."

All other matters must be resolved at extraordinary meetings, including:

increasing the corporate capital to over five times the current amount of any company which is not publicly held;

capital reductions and returns;

redemption, reimbursement and writing down of shares;

mergers, transformations and dissolutions; appointments, removals and remuneration of the liquidators; spin-offs; and consideration of our accounts and other matters connected with conduct in our winding-up;

limitation or suspension of preferential rights in the subscription of new shares;

issuance of debentures and conversion of same into shares; and

amendment of our by-laws.

The president of the Board or a person appointed at the meeting presides over shareholders' meetings. Shareholders' meetings can be called by the Board of Directors, by the Supervisory Committee in certain circumstances specified by law, or by shareholders representing at least 5% of the common stock.

Shareholders may be represented by proxies at shareholders meetings. Our Directors, members of the Supervisory Committee, managers and employees cannot act as attorney-in-fact. The shareholders or proxies attending a shareholders meeting must sign the Register of Attendance.

Directors, syndics (as defined below) and general managers are entitled and obliged to attend, and to be heard at all meetings of shareholders. If they are also shareholders, they cannot vote on decisions connected with their undertakings, responsibility or removal.

The quorum for an ordinary meeting of shareholders held on first notice requires the presence of shareholders representing a majority of the shares entitled to vote. On second notice, a meeting is considered duly constituted regardless of the number of shareholders present. Resolutions are adopted by majority of votes present, except when the By-Laws require a higher number.

An extraordinary meeting held on first notice is duly constituted with the presence of shareholders representing sixty percent of the shares entitled to vote, provided a greater quorum is not required by the By-Laws. On second notice, shareholders representing thirty percent of the shares entitled to vote are required.

Decisions are adopted by a majority of eligible votes present, unless a greater number is stipulated in the By-Laws, or required by law, such as decisions regarding our transformation, extension or renewal; any anticipated dissolution; the transfer of our domicile abroad; or a material change of the corporate purpose or the total or partial refunding of the capital stock. In such circumstances, a majority vote of all eligible shares is necessary. Approval of a merger or spin-off also requires the vote of a majority of all eligible shares except in the case of a publicly held company, in which case the approval by a majority of eligible votes present is required to approve the transaction.

When the meeting affects the rights of a class of shares, the consent or ratification of the relevant class of shares is required. The relevant class of shares must hold a special meeting governed by the rules for ordinary meetings of shareholders.

Shareholders' decisions may be voided by a court order when shareholders' meetings have been held in circumstances contrary to the law, our By-Laws or internal regulations.

Our corporate governance practices are governed by applicable Argentine law (particularly, the Commercial Companies Law No. 19.550, as amended), Decree No. 677/01, the rules and regulations of the CNV and our By-laws. We have securities that are registered with the SEC and listed on the New York Stock Exchange (the "NYSE") and, consequently, we are subject to the rules and regulations of the NYSE.

NYSE Corporate Governance

On November 4, 2003, the NYSE established new corporate governance standards ("NYSE standards") that are applicable to NYSE-listed companies, including non-U.S. issuers. These standards were then amended on November 3, 2004. Under these standards, non-U.S. issuers are permitted, in general, to follow their home country corporate governance practices in lieu of most of the new NYSE corporate governance requirements (the "NYSE Sections") codified in Section 303A of the NYSE's Listed Company Manual. Non-U.S. issuers must comply with NYSE Sections 303A.06, 303A.11 and 303A.12(b) and (c), however non-U.S. issuers will have until July 31, 2005, to comply with the new audit committee standards set out in Section 303A.06 and will only be required to comply with Section 303A.12(c) after that date. Section 303A.11 requires that non-U.S. issuers disclose any significant ways in which their corporate governance practices differ from those followed by U.S. companies in accordance with the NYSE Sections. A non-U.S. issuer is required to provide a brief, general summary of the significant differences by means of (i) the company's website (in English) or (ii) the issuer's annual report as distributed to its investors in the United States.

Pursuant to the requirements of Section 303A.11, the following is a summary of the significant differences between our corporate governance standards and those required of U.S. companies in accordance with the NYSE Sections:

303A.01.
Requirement: Listed companies must have a majority of independent directors on their board of directors.
Argentine Requirement: Under Argentine law, a board of directors is not required to be comprised of a majority of independent directors. The last shareholders' meeting was held on April 30, 2008.

303A.02.
Requirement: Establishes general standards to evaluate directors' independence (no director qualifies as "independent" unless the board of directors affirmatively determines that the director has no material relationship with the listed company; directly or as a partner, shareholder or officer of an organization that has a relationship with the company), and emphasizes that the concern is independence from management. The board of directors is also required to express an opinion with regard to the independence or lack of independence of each individual director.

Argentine Requirement: To qualify as an "independent" or "non-independent" director, CNV standards (General Resolution No. 400/02) are substantially similar to NYSE standards. CNV standards provide that independence is required with respect to a company and to its controlling shareholders or to shareholders with material holdings (35% or more) and that, for any person to be appointed as an independent director, such person must not perform executive functions within the company. Close relatives of any persons who would not qualify as "independent directors" would also not be considered "independent." When directors are appointed each shareholder that nominates a director is required to report at the meeting whether or not such director is independent.

303A.03.
Requirement: The non-management directors of each listed company must meet at regularly scheduled executive sessions without management.

Argentine Requirement: Neither Argentine law nor CNV rules require that any such meetings be held. Under Argentine law, a board of directors must meet at least once every three months. Our Board of Directors meets at least once every three months and upon the request of any member of the Board of Directors.

303A.04.
Requirement: Listed companies must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties.

Argentine Requirement: Neither Argentine law nor CNV rules require the establishment of a nominating/corporate governance committee. The right to nominate directors is vested in the shareholders and nominations are made at the shareholders' meeting. Pursuant to CNV standards, the person who nominates a director shall report at the shareholders' meeting whether or not the nominee is an "independent person" based on criteria established by CNV (which are similar to NYSE standards).

303A.05.

Requirement: Listed companies must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties.

Argentine Requirement: Neither Argentine law nor CNV regulations require the establishment of a compensation committee. An audit committee has to give an opinion about the reasonableness of directors' compensation and stock option plans, as approved by the board of directors. The compensation of members of the board of directors is approved by shareholders at their annual meeting. Under Argentine Corporations Law, the maximum remuneration that members of a board of directors can collect, including wages and remuneration, cannot exceed 25% of corporate earnings. This percentage is limited to 5% if no dividend is distributed.

303A.06.

Requirement: Listed companies must have an "audit committee" that satisfies the requirements of Rule 10A-3 under the Exchange Act. Foreign private issuers must satisfy the requirements of Rule 10A-3 under the Exchange Act by July 31, 2005.

Argentine Requirement: Pursuant to Decree No. 677/01 and CNV standards, the Argentine companies that are authorized by CNV to make public offerings of equity had to establish an audit committee prior to May 28, 2004. The majority of the members have to be independent. As required, on May 27, 2003, our Board of Directors approved the Charter for the Audit Committee. On May 7, 2004, our Board of Directors established an Audit Committee consisting of three directors. As of the date of this annual report, the Audit Committee consists of three independent directors.

303A.07(a):

Requirement: An audit committee shall consist of at least three members. All of its members must satisfy the requirements for independence set out in Section 303A.02 and shall be financially literate or must acquire such financial knowledge within a reasonable period and at least one of its members shall have experience in accounting or financial administration.

Argentine Requirements: Argentine law requires an audit committee to be comprised of at least three members, with a majority of independent members. We are not required to satisfy the audit committee requirements of Rule 10A-3 under the Exchange Act until July 31, 2005. Pursuant to CNV standards, audit committee members are required to be conversant in business, financial or accounting matters and issues. In addition, CNV standards require the training of an audit committee's members in the practice areas that would permit them to carry out their duties on the audit committee.

303A.07(b).

Requirement: If a member of the audit committee is simultaneously a member of the audit committee of more than three public companies, and the listed company does not limit the number of audit committees on which its members may serve, then, in each case the board of directors shall determine whether the simultaneous service would prevent such members from effectively serving on the listed company's audit committee, and shall disclose its decision in the annual proxy statement of the company or in the company's annual report on Form 10-K, which is filed with the SEC.

Argentine Requirement: A comparable provision, relating to an audit committee member's simultaneous membership on the audit committee of other public companies, does not exist under Argentine law or CNV standards.

303A.07 (c).

Requirement: An audit committee shall have a written charter establishing the duties and responsibilities of its members, including the duties and responsibilities required, at a minimum, by Rule 10A-3(b)(2-5) of the Exchange Act.

Argentine Requirement: The functions and responsibilities of an audit committee, established by Decree No. 677/01 and CNV standards, are essentially the same as those provided for under Rule 10A-3 of the Exchange Act.

303A.07 (c) (iii) (A).

Requirement: Provides that the audit committee must, at least annually, obtain and review report by the independent auditor describing: the firm's internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and all relationships between the independent auditor and the company.

Argentine Requirement: Audit committee annual action plan provides for these actions to be taken.

303A.07 (c) (iii) (B-C).

Requirement: Provides that the audit committee shall: meet to review and discuss the company's annual audited consolidated financial statements and quarterly financial statements with management and the independent auditor, including reviewing the company's specific disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," and discuss the company's earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.

Argentine Requirement: Audit Committee shall review the internal control system and the accounting and administrative system of the company, evaluate the auditors external performance and issue an opinion regarding filing and publication of the annual consolidated financial statements.

303A.07 (c) (iii) (D-H).

Requirement: Provides that the audit committee shall: discuss policies with respect to risk assessment and risk management; meet separately, periodically, with management, with internal auditors (or other personnel responsible for the internal audit function) and with independent auditors; review with the independent auditor any audit problems or difficulties and management's response; set clear policies for hiring external auditors' employees; and report regularly to the board of directors.

Argentine Requirement: Argentinean provisions are similar except that there is no such provision regarding hiring external auditors' employees contained in Argentine law or our By-Laws. However, Decree No. 677/01 establishes that an audit committee has the duty to give its opinion in connection with the hiring of external auditors by the board of directors.

303A.07 (d).

Requirement: Provides that each company must have an internal audit function to provide management and the audit committee with ongoing assessments of the company's risk management processes and system of internal control.

Argentine Requirement: There is no specific reference within the Argentine law nor within CNV standards about internal function. We have an internal audit department that reports risk management assessments to our Board of Directors.

303A.08.

Requirement: Shareholders must be given the opportunity to vote on equity compensation plans and material revisions thereto, with limited exemptions set forth in the NYSE standards.

Argentine Requirement: We have no stock option programs for our executive officers and senior management. The determination of whether to compensate a director is made at a shareholders' meeting.

303A.09.

Requirement: Listed companies must adopt and disclose corporate governance guidelines.

Argentine Requirement: Decree No. 677/01 requires additional information that issuers must include in their annual reports, such as information related to the decision-making organizational structure (corporate governance), the company's internal controls system, information about directors and officers' compensation, stock options, and any other compensation system applicable to the members of the board of directors and managers. Decree No. 677/01 does not address the remaining issues included in NYSE Section 303A.09.

303A.10.

Requirement: Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.

Argentine Requirement: A Code of Ethics is not a requirement for Argentine public companies, but our Board of Directors, on June 25, 2004, approved the Code of Ethics for directors, officers, employees, suppliers and contractors.

303A.12 (a).

Requirement: The CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards, qualifying the certification to the extent necessary.

Argentine Requirement: A comparable provision does not exist under Argentine law.

303A.12 (b).

Requirement: The CEO shall notify the NYSE in writing whenever any executive officer of the company becomes aware of any material noncompliance with of any applicable provision of NYSE Section 303A.

Argentine Requirement: A comparable provision does not exist under Argentine law.

303A.12 (c).

Requirement: Listed companies must submit an executed Written Affirmation annually to the NYSE. In addition, listed companies must submit an interim Written Affirmation each time a change occurs to the board or any of the committees subject to Section 303A.

Argentine Requirement: Pursuant to Argentine standards, this is not applicable. Notwithstanding, in 2008, the Annual Written Affirmation was sent on time to the NYSE.

Additionally, on June 17, 2010, we received a notice from the NYSE that our ADRs had been suspended from trading on the NYSE and we were delisted as a result of the reorganization filing.

Supervisory Committee

In accordance with the rules contained in Argentine Corporations Law No. 19,550, as amended, corporate supervision is entrusted to a Comision Fiscalizadora, or a "Supervisory Committee." The election of its members, individually known assíndicos("syndics"), and the organization and procedures of the committee are regulated by our By-Laws.

The Supervisory Committee has certain general powers and duties, notwithstanding any others as may be provided for under the Argentine Corporations Law or our By-Laws:

supervising our management, by an examination of our books and other documents whenever it may deem convenient, but at least once every three months;

verifying, in like manner and with like frequency, our cash and securities, as well as our obligations and the performance thereof;

receiving notice of and attending meetings of the Board of Directors, the Executive Committee and shareholders. The Supervisory Committee may express its opinions at these meetings but is not allowed to vote;

ensuring that our directors have posted the required performance bonds and that the same are maintained;

submitting a written report on our economic and financial condition to the annual shareholders meeting;

providing information within its scope of responsibility requested by holders of shares representing at least 2% of our capital;

calling the shareholders to an extraordinary meeting whenever it may deem necessary, and to annual or special class meetings if the board should fail to do so as required;

overseeing the management of our business for compliance with the law, our By-Laws or internal regulation, and any resolutions adopted by the shareholders;

placing items on the agenda for shareholder's meetings;

supervising our liquidation; and

investigating formal shareholder complaints.

The members of the Supervisory Committee are entitled to obtain information and make administrative inquiries into facts or circumstances relating to any fiscal year prior to the date of their appointment.

The members of the Supervisory Committee are jointly liable for the performance of their duties and obligations as imposed on them by law, the By-Laws, or our internal procedures. They are also jointly liable with the directors for any damage occurring which would have been prevented had they acted in compliance with the law, the By-Laws, our internal regulations or the resolutions adopted by the shareholders. Our By-Laws provide that we shall be supervised by a Supervisory Committee of three members and three alternate members elected by the shareholders to serve for a one-year term and who may be reelected. Any vacancies in the Supervisory Committee shall be filled by the alternate members in the order of their appointment. Any of its members may act on behalf of the Supervisory Committee at Board of Directors or shareholders meetings.

Board of Directors

The current Board of Directors is made up of eleven directors and five alternate directors. Members of the Board of Directors are appointed by the annual ordinary meeting of shareholders and are elected for a period of one to three fiscal years, at the end of which they may be re-elected or replaced.

Our By-Laws require that after the number of directors has been determined at the shareholders meeting, the Class A shareholders elect six directors and six alternate directors. The Class B shareholders must elect four directors and four alternate directors. Class A and Class B shareholders meet at special class meetings to be called simultaneously with the annual general meeting for these purposes. Any directors appointed to office by the above procedure may only be removed from office by the shareholder class they represent; provided that the shareholders may remove the entire Board of Directors by majority vote of both share classes.

Certain Powers of the Board of Directors

Our By-Laws provide that the Board of Directors shall have full power to manage and dispose of our property, including such powers as are provided under Section 1881 of the Civil Code and Section 9 of Decree No. 5,965/63 that must be vested under a special power of attorney. The Board of Directors may, in our name and stead, perform any acts that are in furtherance of our corporate purpose, including banking transactions with Banco Nación, Banco de la Provincia de Buenos Aires, and other public or private banking entities.

The compensation of the directors is set at shareholders' meetings. Under Argentine corporate law, the maximum remuneration that members of a Board of Directors can collect from a corporation, including wages and other remuneration, cannot exceed 25% of corporate earnings. This percentage is limited to 5% if no dividend is distributed. This limitation is increased in proportion to any dividends paid. When one or more directors perform special functions or technical administrative functions and the small amount or nonexistence of earnings make it necessary to exceed the percentage established, the corporation cannot pay such sums without express approval at a shareholders' meeting.

Preemptive Rights

Under the Argentine Corporations Law, in the event of a capital increase, holders of common shares of any class have preemptive rights, proportional to the number of shares owned by each holder, to subscribe for shares of capital stock of the same class as the shares owned by the holder. Preferred shares are entitled to preemptive rights only with respect to preferred share issuances. Preemptive rights also apply to issuances of preferred shares and convertible securities, but do not apply upon conversion of such securities. Although any preemptive rights will be offered to the Depositary as the record owner of Class B Shares on behalf of all holders of ADSs, United States holders of ADSs may not be able to exercise their preemptive rights unless a registration statement under the Securities Act is effective with respect to such rights or an exemption from the registration requirement is available.

The issuance of common shares corresponding to future capital increases must be made in the proportion of 51% Class A Shares and 49% Class B and Class C Shares, maintaining the proportion between Class B and Class C Shares existing at the time the issuance is approved. According to the Pliego, if the Class A shareholder does not exercise its preemptive rights with respect to new Class A Shares to be issued in a capital increase, approval by ENARGAS will be required to undertake such capital increase. Such approval will be granted if in connection with such capital increase (i) all our Class A Shares (including those being offered as part of the capital increase) are transferred in a single block or in a manner that results in the new owner holding all of our outstanding Class A Shares, (ii) the transfer of the Class A Shares does not affect the quality of the gas distribution services provided by us and (iii) the technical operator, or a successor thereto that is acceptable to ENARGAS, has at least a 10% interest in the outstanding common stock of the new owner and has entered into a technical assistance agreement with us.

In accordance with the terms of Article 194 of the Argentine Corporations Law, shareholders who have exercised preemptive rights and indicated their intention to exercise accretion rights are granted the right to assume pro rata the non-exercising shareholders' preemptive rights in proportion to the shares purchased by them when exercising their preemptive rights. Preemptive rights must be exercised within 30 days after notice to the shareholders of their right to preempt the capital increase has been published for three days in the Official Gazette of Argentina and in a newspaper widely circulated in Argentina. Pursuant to Argentine Corporations Law, companies authorized by the CNV to publicly offer stock may, by resolution of an extraordinary meeting of shareholders, reduce to ten days the period in which preemptive or accretion rights must be exercised. Shares not subscribed by the shareholders by virtue of their exercise of preemptive rights or accretion rights may be offered to third parties.

In the past, preemptive rights in respect of stock could only be restricted in certain exceptional cases by a resolution of an extraordinary meeting of shareholders. However, pursuant to Decree No. 2,284/91, ratified by Law No. 24,307 on December 30, 1993, any company (including us) authorized by the CNV to publicly offer its stock may additionally limit or suspend preemptive rights in respect of such stock in accordance with the rules of the CNV.

Changes in Shareholder Rights

The rights of shareholders may only be changed by amending our By-Laws or as decided by an extraordinary shareholders meeting and ratified by a special shareholders meeting of the relevant class of shares in accordance with Article 15 of our By-Laws. Passing a resolution at an extraordinary shareholders' meeting requires an absolute majority of shares entitled to vote, which, if held on first call, would require 61% of the outstanding shares, and on second call would require the number of shares with voting right present. Extraordinary shareholders' meetings have exclusive authority on matters related to reduction of capital, merger or other forms of our corporate reorganization, dissolution and liquidation, issuance of debentures, increases of capital in excess of five times the existing capital and any other matter not subject to the regular meeting as per the law.

Limitations on Foreign Investment in Argentina

Under the Argentine Foreign Investment Law, as amended, and its implementing regulations, together, the "Foreign Investment Legislation," the purchase of shares of an Argentine corporation by an individual or legal entity domiciled outside of Argentina or by an Argentine company of foreign capital (as defined in the Foreign Investment Legislation) constitutes foreign investment. Currently, foreign investment in industries is not restricted and no prior approval is required to make foreign investments. No prior approval under the Foreign Investment Legislation is required in order to purchase our Class B Shares or ADSs or to exercise financial or corporate rights thereunder.

Change of Control

Pursuant to Article 18 of our By-Laws, any amendment of articles 2, 3, 4, 5, 6, 7, 11, 13, 18 or 32 must be approved by ENARGAS. See Item 7: "Major Shareholders and Related Party Transactions-Major Shareholders-Gas Argentino."

Mandatory Tender Offer

Decree No. 677/01 regulates mandatory tender offer procedures, which are summarized in the paragraphs below.

Any individual or entity that intends to acquire, during a term of 90 days, control of a company, either directly or indirectly, through one or several successive transactions, voting shares, subscription rights, options over shares, convertible notes or similar securities that directly or indirectly may provide such purchaser with the right to subscribe, acquire or convert into, voting shares that represent a "significant ownership" in the share capital and votes of a company, must prior to such acquisition, within 10 business days, make a tender offer or exchange offer according to the procedures and requirements established by the CNV. "Significant ownership" means at least 35% and 51% of the share capital and votes, respectively, of the target company.

If the offeror wishes to acquire at least 35% of the share capital and votes of a company it must launch a tender offer to acquire an amount of securities that allows such offeror to obtain at least 50% of the share capital and votes of the target company. If the offeror has an ownership interest in the share capital or votes of the target company of at least 35% but less than 51% of the share capital and votes and its purpose is to increase its participation by at least 6% of the share capital and votes of the target company within the next 12 (twelve) months, the offeror must launch the offer to acquire an amount of shares that would allow such offeror to obtain at least an additional 10% of the share capital and votes of the target company. If the offeror wishes to acquire a participation in the target company equal to or higher than 51% of the share capital or votes, it must launch an offer to acquire an amount of securities that would allow the offeror to obtain 100% of the share capital and votes of the target company.

The mandatory tender offer is not required when the acquisition of a "significant ownership" does not entail acquiring control of a company, which is acquiring more than 50% of the voting securities or de facto control, or when a change of control occurs as a result of a merger or spin-off.

Securities possessed or acquired by individuals or legal entities "acting in concert" shall be deemed to be possessed or acquired by the same individual or legal entity. "Acting in concert" means the coordinated action of two or more persons pursuant to a formal or informal agreement to cooperate actively in the acquisition, possession or disposition of securities of a company, either acting through any such persons or through any company or other type of association in general or through other related persons or persons under their control or through persons that are entitled to voting rights on account of such persons.

In the following cases, there is a presumption that, except as may be otherwise proved, a concerted action has taken place: (a) when legal entities have a significant ownership in one or more of the other participating legal entities in excess of 10% of the share capital, or reciprocal significant ownership in the event of foreign companies, or are affiliate companies as defined by article 33 of the Argentine Corporations Law; (b) in the case of legal entities and individuals participating together, when the individuals or their spouses, ancestors, descendents, or any consanguineous relatives up to the fourth grade or legal relatives up to the second grade hold any office in the board of directors or supervisory committee or in the senior management of any of the participating legal entities or have a significant ownership therein; (c) when the persons involved have the same legal representatives, attorneys in fact or members of the board of directors, supervisory committee or senior management; (d) when the individuals or legal entities involved share the same domicile; or (e) when the persons are related through a binding agreement governing the manner in which they must exercise their rights as owners of the securities and such agreement is dated prior to the beginning of the agreed upon performance.

For purposes of calculating the percentage of ownership, the shares and other securities held or owned plus the voting rights that may be exercised in connection with usufructs, pledges or any other legal or contractual title shall be taken into account.

The tender offer must be directed to all holders of voting shares (including holders of non-voting shares that at the time the authorization of the tender offer is sought are entitled to vote), convertible notes, subscription rights or stock options.

Companies shall become subject to the mandatory tender offer (i) as from the date of any shareholders meeting which decides to adhere to the public offering regime or (ii) automatically upon the close of the first shareholders meeting held after April 4, 2003.

If any company wishes not to become subject to the mandatory tender rules described above, it must, in the first shareholders' meeting to be held after April 6, 2003, decide to include in its by-laws a clause stating that it is a "Company Not Adhering to the Optional Mandatory Tender Offer Regime." If the company in question fails to opt out by approving such a resolution as aforesaid, it shall become irrevocably subject to the described requirements.

We opted out of such mandatory tender rules.

Last Amendments to Our By-Laws

In a Shareholders' Meeting held on April 29, 2003, an amendment to our By-Laws was approved. The amendment added two new clauses, (i) article 6 bis, which states that we are a company that is not subject to the mandatory tender offer regime and (ii) article 26, which permits meetings of the Board of Directors and shareholders meetings to be conducted without physical attendance at such meetings by members of the Board or shareholders, as the case may be, provided that means of communication are established by which members of the Board of Directors and Shareholders may participate externally and increased the number of members of the Board of Directors from 7 to 9 amending article 20 to reflect that change.

In the Shareholders' Meeting held on December 10, 2003 a new amendment to article 20 of the By-Laws was approved that increased the number of the members of the Board of Directors from 9 to 11 and allows the shareholders to elect these directors for renewable terms of one to three years.

The last modification of our by laws was approved on July 29, 2005 and is registered with the Public Registry of Commerceunder number 11,027, book 29 of Corporations. The amendment increased the number of members of the Board of Directors from 9 to 11, amending article 20 to reflect that change. It also states that three of the members of the Board of Directors should be elected by Class B Shareholders meeting and have to be independent pursuant to Argentine Law and Rule 10 A enacted pursuant to the Securities Exchange Act of 1934.

Material Contracts

Not applicable.

Exchange Controls

Fluctuations in the exchange rate between Pesos and U.S. Dollars could affect (i) our ability to meet our foreign currency obligations, (ii) the Peso price of our Class B Shares on the BCBA, and (iii) the market price of our ADSs. Currency fluctuations will also affect the U.S. Dollar amounts received by holders of ADSs on conversion by the Depositary of cash dividends paid in Pesos on the underlying Class B Shares.

Prior to December 1989, the Argentine foreign exchange market was subject to exchange controls. From December 1989 until April 1991, Argentina had a freely floating exchange rate for all foreign currency transactions and, furthermore, in March 1991 exchange controls were eliminated. As a result of inflationary pressures, the Argentine currency was devalued repeatedly during the 30-year period ending in 1991. On March 20, 1991, the Argentine Government announced an economic reform plan known as the Convertibility Plan, which included the Convertibility Law. Since April 1, 1991, when the Convertibility Law became effective, the Peso had been freely convertible into U.S. Dollars at a 1 to 1 rate. Under the Convertibility Law, the Central Bank (i) was required to sell U.S. Dollars to any person who so required at a rate of not more than one Peso per U.S. Dollar and (ii) was required to maintain a reserve in foreign currencies, gold, short-term investments, net claims on Asociacion Latinoamericana de Integracion, and certain Argentine public bonds denominated in foreign currency, all valued at market prices, at least equal to the monetary base.

Beginning in early December 2001, the Argentine Government implemented a number of monetary and currency exchange control measures that included restrictions on the withdrawal of funds deposited with banks and tight restrictions on making certain transfers abroad, including transfers in connection with repayments to foreign creditors. These regulations, which apply to us, have been constantly modified since they were first enacted and those restrictions have, in many cases, been partially lifted as described below.

On January 6, 2002, the Public Emergency Law (i) repealed the Ps. l to US$ 1 exchange rate convertibility provided under the Convertibility Law, and (ii) authorized the President to establish the new monetary regime and exchange rates.

On February 8, 2002, the Central Bank established certain restrictions to foreign exchange transfers outside Argentina. As a general rule, transfer of funds abroad required prior Central Bank approval. However, this general principle has been eased by numerous exceptions introduced since December 2002.

On January 7, 2003, the Central Bank established that Argentine companies may freely transfer corporate profits and dividends corresponding to audited consolidated financial statements (i.e. no prior Central Bank approval is needed).

Beginning on September 3, 2002, the proceeds of foreign loans (including bond issuances, credit facilities, repos, etc.) must be brought into the local market, exchanged for Pesos and credited to a local bank account within a certain timeframe established by the regulations from time to time. Currently, such term is set in 365 days following disbursement for financial loans and generally, 30 days from disbursement in the case of export financings.

In addition, beginning on June 30, 2003, all purchases and sales of foreign currency, as well as transfers to and from the local market, must be registered with the Central Bank.

Furthermore, the regulations establish that principal under financial loans may not be repaid (irrespective of the form of cancellation or of whether access to the foreign exchange market is necessary or not) prior to the expiration of a 365-day term counted as from the conversion to Pesos and deposit in a local bank account of the financing proceeds or the date of the last renovation or refinancing. Foreign trade financings and publicly traded and listed notes are exempted from this minimum maturity requirement.

Repayment of principal of, and interest on, foreign financial indebtedness was initially subject to the Central Bank's prior authorization. Currently, local companies, including us, may:

Pay interest abroad at maturity or 15 days in advance, without prior Central Bank authorization. Access to the local exchange market for the payment of interest services is limited to (i) interest accrued as from the date the proceeds of the financing are brought into the local market and converted into Pesos, or (ii) interest accrued as from the disbursement date provided the financing proceeds are deposited in the corresponding accounts of licensed entities for their transfer and conversion into Pesos within 48 hours following disbursement.

Repay principal at maturity (or 30 days in advance, to the extent that the amounts so prepaid were brought into the local market and exchanged for Pesos, and the minimum maturity term described above is complied) without prior Central Bank authorization. The prepayment of principal more than 30 days in advance is subject to the following conditions: (i) if the prepayment is not made in the context of a debt restructuring process, then the amount prepaid should not exceed the present value of such amount (according to the formula provided by the Central Bank), and (ii) if the payment is totally or partially financed with new indebtedness or the prepayment is made within the context of a debt restructuring process, then the new terms and conditions of the indebtedness and the payment in cash, shall not result in an increase of the present value of the whole debt (according to the formula provided by the Central Bank).

In addition, the execution and settlement of futures contracts, forward contracts and other derivative instruments, except in some particular cases and subject to specific conditions, are subject to the prior authorization of the Central Bank.

Access to the exchange market by Argentine residents for the making of certain investments, including portfolio and direct investments, real estate investments and granting of loans to non-Argentine residents, is generally limited to US$ 2 million per person per calendar month, provided the Argentine resident does not have due and unpaid external debt at the time of access to the local exchange market. Certain formal requirements apply and in the case that the amount of foreign currency transferred by a resident exceeds US$250,000 during the calendar year, the intervening bank must confirm that the foreign currency purchased is compatible with the assets and earnings declared by the resident for tax purposes. The regulations allowed for a specific period of time, transfers in excess of the above mentioned cap in the case of portfolio investments applied, within a certain term, to the payment of external financial debts, payment of imports, payment of dividends or the making of direct investments abroad. The last extension expired on February 28, 2011. Although the Central Bank has consistently extended the effectiveness of this exception, it cannot be assured that a new extension will be enacted.

Moreover, pursuant to Decree No. 616/05, unless expressly exempted, foreign financial loans granted to local residents and other transfers of funds made by non-Argentine residents are subject to a 365-day dollar-denominated, non-interest bearing and non-transferable US dollar deposit to be created over 30% of the amounts transferred in a local bank. Exceptions include, among others, and subject to compliance with certain requirements, financial loans with a minimum average life of two years applied to the purchase of fixed assets and inventories. Also, the primary issuance (if seen from the issuer's standpoint) or the primary subscription (if seen from the investor's standpoint) of publicly traded and listed shares and/or debt securities is not subject to the 30% mandatory deposit.

Additionally, the repatriation abroad of funds and investments held or received locally by non-Argentine residents is subject to specific rules. Generally, the repatriation of direct investments (equity investments for at least 10% of the company's capital stock) is subject to the investor evidencing that it has maintained its investment for at least 365-days. In the case of portfolio investments (including, inter alia, equity investments for less than 10% of the company's capital stock, investments in mutual funds, credit portfolios, locally payable bonds in Pesos, etc.) in addition to evidencing the minimum permanency term, the investor shall be required to evidence that it transferred to Argentina the funds required to make the investments. Moreover, in the case of portfolio investments, repatriation is limited to US$ 500,000 per month. Certain additional requirements exist. In both cases, in the event the foreign investor is domiciled or organized in a jurisdiction of null or low taxation (in accordance with Argentine law), the repatriation of its portfolio or direct investments shall be subject to the prior authorization of the Central Bank.

For a complete description of the current foreign exchange controls, investors should seek advice from their legal advisors and review the regulations issued by the Central Bank, Decree No. 616/05 and the Foreign Exchange Criminal Law No. 19,359, as amended and supplemented from time to time. The text of the same is available at the legislative information websites of the Ministry of Economy and Public Finances (www.infoleg.gov.ar) or of the Central Bank (www.bcra.gov.ar).

Taxation

General

The following discussion is a summary of the material Argentine and U.S. federal income tax matters that may be relevant to the acquisition, ownership and disposition of our ADSs or Class B Shares, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to acquire, own or dispose of our ADSs or Class B Shares.

The summary is based upon tax laws of Argentina and the federal income tax laws of the United States as in effect on the date of this annual report, which are subject to change (possibly with retroactive effect) and different interpretations.

Holders of ADSs and Class B Shares should consult their own independent tax advisors as to the United States, Argentine or other tax consequences of the acquisition, ownership and disposition of the ADSs or Class B Shares in their particular circumstances.

Argentine Taxes

Income Taxation

Dividends. Dividend payments on the ADSs or Class B Shares, whether in cash, property, or stock, are not subject to Argentine withholding or other taxes except as described below.

Pursuant to the Income Tax Law, a 35% withholding tax is applicable to the amount of dividends distributed on the ADSs or Class B Shares in excess of a company's "net taxable income" accumulated at the end of the fiscal year immediately preceding the date of the distribution of such dividends. For purposes of such withholding tax, or the "equalization tax," "net taxable income" is (i) the net taxable income for the year minus the income tax already paid on such income, plus (ii) dividends and income on equity investments allocable to such fiscal year which were not computed to determine the net taxable income for general income tax calculation purposes. We will withhold the appropriate tax, if applicable.

Capital gains. Capital gains derived by nonresident individuals or foreign entities not having a permanent establishment in Argentina from the sale, exchange or other disposition of ADSs or Class B Shares are not currently subject to Argentine income tax.

Resident individuals, except those included in Section 49(c) of the Argentine Income Tax Law, are not subject to any tax on capital gains derived from the sale, exchange or other disposition of the Class B Shares or ADSs. Section 49(c) generally refers to stock brokers.

Capital gains derived by entities organized in Argentina and foreign entities having a permanent establishment in Argentina from the sale, exchange or other disposition of the ADSs or Class B Shares are subject to a 35% income tax.

Personal Assets Tax

Individuals (i.e., natural persons) and undivided estates (whether or not citizens of, or resident in, Argentina) who are deemed to be the "direct owners" of shares or other types of equity in Argentine business entities incorporated under the Argentine Corporations Law will be subject to a one-half of one percent (0.5%) personal assets tax on their holdings of such equity on December 31 of each year, on the basis of the percentage that such equity represents in respect of the business entity's net equity (as defined in the personal assets tax regulations) in accordance with its financial statements at December 31 of the relevant fiscal year.

Shares and other types of equity in Argentine business entities incorporated under the Argentine Corporations Law owned by non-resident legal entities will be subject to a one-half of one percent (0.5%) personal assets tax on their holdings of such equity on December 31 of each year, on the basis of the percentage they represent in respect of the business entity's net equity, according to its balance sheet at December 31 of the relevant fiscal year.

Corporations and other entities organized or incorporated in Argentina and Argentine branches and permanent establishments of corporations and other entities not organized or incorporated in Argentina generally will not be subject to the personal assets tax with respect to their holdings of securities issued by Argentine business entities.

An individual or an undivided estate which is resident in Argentina and owns registered (not bearer) shares or an other type of equity of a foreign legal entity which in turn owns shares of an Argentine company may credit against its personal assets tax liability a portion of the amount of the personal assets tax paid by the foreign entity on account of its shares in the Argentine company equal to the proportion of the shares of such Argentine company represented by the shares of the Argentine company owned by such individual or estate.

The Personal Assets Tax Law No. 23966, as amended, and related regulations have not yet been extensively interpreted or applied by the Argentine tax authorities or courts, and, accordingly, certain aspects of such law remain unsettled. It remains unclear, for example, whether the references to "direct" ownership refer only to record ownership (including ownership by a Depository) or extend to beneficial ownership. In addition, the concept of "trading," as used in the laws in relation to non-Argentine corporations and other entities, has not yet developed, leaving it unclear whether such term refers to actual and ongoing trading, periodic trading or merely consummation of an offering of securities within or outside Argentina. There can be no assurances concerning the interpretation or application of these and other provisions of the law and related regulations by the tax authorities and courts.

We, like other Argentine issuers, are liable for the payment of this tax with respect to Argentine securities (in this case, the ADSs or Class B Shares) owned by non-Argentine corporations and other entities. Thus, we may eventually seek reimbursement from the direct owner of such securities in respect of any amounts paid to Argentine tax authorities as personal assets tax (whether by foreclosing on such securities, deducting them from dividends to be distributed or otherwise).

Deposits and Withdrawal of Class B Shares in Exchange for ADSs

No Argentine tax is imposed on the deposit or withdrawal of Class B Shares in exchange for ADSs.

Tax Treaties

Argentina has entered into tax treaties with several countries. There is currently no tax treaty or convention in effect between Argentina and the United States.

Other Taxes

Value Added Tax (VAT). The sale or disposition of the Class B Shares or ADSs is not subject to VAT unless effected by a person that regularly sells them and is a resident in Argentina.

Estate and Gift Taxes, Stamp Duties and Similar Taxes. There are no Argentine inheritance, succession or gift taxes applicable to the ownership, transfer or disposition of Class B Shares or ADSs. There are no Argentine stamp, issue, registration or similar taxes or duties payable by holders of Class B Shares or ADSs.

However, there is an estate and gift tax in the Province of Buenos Aires on assets located in that province or transfers to residents of that province.

Shares issued by corporations in other jurisdictions are deemed to be located in the Province of Buenos Aires if (a) they are located in the Province of Buenos Aires at the time of the transfer or (b) they have assets in the Province of Buenos Aires. In the case of a corporation that is not located in the Province of Buenos Aires at the time of transfer or one that has assets in the Province of Buenos Aires, shares of such corporation are subject to tax in the same ratio as the assets located in the Province of Buenos Aires bear to the total assets of the non-resident corporation.

There is a standard deduction from the tax base of Ps. 50,000 after which all amounts will be subject to the tax, at rates ranging from 4% to 21.925%, depending on the value of the assets transferred and the closeness of the connection between transferor and transferee.

Minimum Presumed Income Tax. Legal entities incorporated in Argentina and branches or permanent establishments of foreign corporations are subject to the Minimum Presumed Income Tax on the value of their assets; the tax rate is 1%. If the taxable assets in Argentina total less than Ps. 200,000, the owner is exempt from this tax. The amount paid as income tax can be credited towards the Minimum Presumed Income Tax.

Shares in business entities also subject to Minimum Presumed Income Tax are excluded from the taxable asset base.

If the Minimum Presumed Income Tax exceeds income tax during one fiscal year, such excess may be computed as prepayment of any income tax in excess over the Minimum Presumed Income Tax that may be generated in the next ten fiscal years.

On June 15, 2010, this tax was declared unconstitutional by the National Supreme Court in theHermitage S.A. case where it was proven that the taxpayer had losses in the periods involved; however the scope of this decision is still unclear.

Tax on Debits and Credits on Bank Accounts. All debits or credits in bank accounts maintained in banking institutions resident in Argentina are subject to a 0.6% tax on each debit and on each credit. Thirty-four percent of the amounts paid under this tax will be creditable to the income tax liability or presumptive minimum income tax liability of the account owner.

Transfer taxes. The sale or exchange or disposition of the Class B Shares or ADSs is not subject to transfer taxes as long as they are publicly traded with authorization from the CNV. Otherwise, they are subject to a 0.8% stamp tax in the city of Buenos Aires.

Court fees. Filing of a lawsuit before an Argentine court will be subject to a 3% court fee, imposed on the amount claimed.

United States Federal Income Tax Considerations

The following summary of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of ADSs or Class B Shares provides general information only, and does not purport to address all of the U.S. federal income tax consequences that may be applicable to a holder of ADSs or Class B Shares. This summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), U.S. Treasury regulations ("Treasury Regulations") promulgated thereunder, administrative pronouncements of the U.S. Internal Revenue Service (the "IRS") and judicial decisions, all of which are subject to change (possibly with retroactive effect) and to differing interpretations. This summary does not discuss any tax consequences arising under the laws of any state, local or non-U.S. tax jurisdictions. Further, this discussion does not address U.S. federal estate and gift tax or the alternative minimum tax consequences of acquiring, holding or disposing of ADSs or Class B Shares or the indirect consequences to holders of equity interests in partnerships (or any other entity treated as a partnership for U.S. federal income tax purposes) that hold ADSs or Class B Shares.

It also does not address all of the tax consequences that may be relevant to certain types of holders subject to special treatment under the U.S. federal income tax laws, such as individual retirement and other tax-deferred accounts, dealers in securities or currencies, insurance companies, tax-exempt organizations, investors in pass-through entities, holders of 10% or more of the total combined voting power of our shares, persons liable for the alternative minimum tax, financial institutions, persons holding ADSs or Class B Shares as part of a hedge, straddle, synthetic security, constructive sale or other integrated investment, or U.S. Holders (as defined below) whose functional currency for U.S. federal tax purposes is other than the U.S. Dollar. This summary is limited to investors who hold ADSs or Class B Shares as capital assets (generally, property held for investment purposes).

For purposes of the following discussion, the term "U.S. Holder" means a beneficial owner of ADSs or Class B Shares that is, for U.S. federal income tax purposes, an individual who is a citizen or resident of the United States; a corporation or other entity treated as a corporation for U.S. federal income tax purposes created or organized in or under the laws of the United States, any state thereof or the District of Columbia; an estate that is subject to U.S. federal income taxation without regard to the source of its income; or a trust, if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in place under applicable Treasury Regulations to be treated as a U.S. person. As used herein, the term "non-U.S. Holder" means a holder of ADSs or Class B Shares who is a beneficial owner of such ADSs or Class B Shares but who is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of ADSs or Class B Shares, the treatment of a partner in the partnership will generally depend upon the status of the partner and upon the activities of the partnership. A holder of ADSs or Class B Shares that is a partnership and partners in such partnership should consult their own independent tax advisors.

For U.S. federal income tax purposes, a U.S. Holder of an ADS will generally be treated as the beneficial owner of the Class B Shares represented by the ADS. Deposits and withdrawals of Class B Shares by holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.

Distributions

U.S. Holders

Subject to the discussion below under "-Passive Foreign Investment Company Considerations," distributions (without reduction of Argentine withholding taxes, if any) made with respect to ADSs or Class B Shares (other than certain pro rata distributions of our capital stock or rights to subscribe for shares of our capital stock) are includible in the gross income of a U.S. Holder as foreign source dividend income on the date such distributions are received by the Depositary, in the case of ADSs, or by the U.S. Holder, in the case of Class B Shares, to the extent paid out of our current or accumulated earnings and profits, if any, as determined for U.S. federal income tax purposes ("earnings and profits"). Such dividends will not be eligible for the dividends received deduction generally allowed to corporations under the Code but may, in the case of ADSs, be taxed at a preferential rate for certain U.S. Holders as discussed in the following paragraph. Any distribution that exceeds our earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder's tax basis in the ADSs or Class B Shares and thereafter as either long-term or short-term capital gain (depending on whether the U.S. Holder has held ADSs or Class B Shares, as applicable, for more than one year as of the time such distribution is actually or constructively received).

A U.S. Holder may be entitled, subject to a number of complex limitations and conditions (including a minimum holding period requirement), to claim a U.S. foreign tax credit in respect of any Argentine income taxes withheld on dividends received with respect to ADSs or Class B Shares. A U.S. Holder who does not elect to claim a credit for any foreign income taxes paid or accrued during the taxable year may instead claim a deduction in respect of such Argentine income taxes, provided that the U.S. Holder elects to deduct (rather than credit) all foreign income taxes paid or accrued for the taxable year. Dividends received with respect to the ADSs or Class B Shares generally will be treated as foreign source income and generally will constitute "passive category income" for U.S. foreign tax credit limitation purposes for most U.S. Holders. The rules with respect to foreign tax credits are complex and U.S. Holders are urged to consult their own independent tax advisors regarding the availability of foreign tax credits under their particular circumstances.

U.S. Holders should be aware that the U.S. Treasury Department has expressed concern that intermediaries in connection with depositary arrangements may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of ADSs. Accordingly, the discussion above regarding the ability to credit Argentine withholding taxes on dividends and the availability of the reduced rate for dividends received by certain non-corporate holders below could be affected by actions taken by parties to whom the ADSs are released and the IRS.

Subject to certain exceptions for short-term and hedged positions, the amount of dividends received by certain non-corporate U.S. Holders (including individuals) in a taxable year beginning on or before December 31, 2012 with respect to the ADSs will currently be subject to taxation at a maximum rate of 15% if the dividends represent "qualified dividend income." Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States and (ii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a passive foreign investment company, or "PFIC." The ADSs are listed on the New York Stock Exchange, and may qualify as readily tradable on an established securities market in the United States so long as they are so listed, but no assurances can be given that the ADSs will be or remain readily tradable. Based on existing guidance, it is not entirely clear whether dividends received with respect to the Class B Shares that are not represented by ADSs will be treated as qualified dividend income, because the Class B Shares are not themselves listed on a U.S. exchange. The potential application of the PFIC rules to our ADSs and Class B Shares is further discussed below. U.S. Holders should consult their own independent tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.

In the case of dividends made in Pesos, the amount includible in the income of a U.S. Holder as a dividend will be calculated with reference to the U.S. Dollar value of the Pesos received, calculated by reference to the exchange rate in effect on the date of receipt by the Depositary, in the case of ADSs, or the U.S. Holders, in the case of the Class B Shares, regardless of whether the payment is in fact converted into U.S. Dollars on such date. A U.S. Holder will have a tax basis in such Pesos equal to the U.S. Dollar value included in gross income. Currency exchange gain or loss, if any, recognized by a U.S. Holder on the subsequent conversion of Pesos into U.S. Dollars will be U.S. source ordinary income or loss to such U.S. Holder. If dividends paid in Pesos are converted in U.S. Dollars on the day the U.S. Holder or the Depositary, as the case may be, receives such dividends, the U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. U.S. Holders should consult their own independent tax advisors regarding the treatment of any foreign currency gain or loss if any Pesos received by them or the Depositary are not converted into U.S. Dollars on the date of receipt.

Non-U.S. Holders

Subject to the discussion below under "-Backup Withholding and Information Reporting," a non-U.S. Holder generally will not be subject to U.S. federal income tax or withholding tax on distributions received with respect to ADSs or Class B Shares that are treated as dividend income for U.S. federal income tax purposes, so long as such distributions are not effectively connected with the conduct of a trade or business within the United States by such non-U.S. Holder (or, if an applicable income tax treaty requires, are not attributable to a U.S. permanent establishment or fixed base of such non-U.S. Holder). A non-U.S. Holder generally will also not be subject to U.S. federal income tax or withholding tax on distributions received on ADSs or Class B Shares that are treated as capital gains for U.S. federal income tax purposes unless such non-U.S. Holder would be subject to U.S. federal income tax on gain realized on the sale of ADSs or Class B Shares as discussed below.

Sale, Exchange or Other Taxable Disposition of ADSs or Class B Shares

U.S. Holders

In general, gain or loss realized by a U.S. Holder on the sale, exchange or other taxable disposition of ADSs or Class B Shares generally will be subject to U.S. federal income tax as capital gain or loss in an amount equal to the difference between the amount realized on the disposition (without reduction for any Argentine taxes) and the U.S. Holder's adjusted tax basis in the ADSs or Class B Shares. Such gain or loss generally will be treated as capital gain or loss and will be long-term capital gain or loss if, at the time of sale, exchange or other taxable disposition, the U.S. Holder held the ADSs or Class B Shares for more than one year. Under current law, capital gains of certain non-corporate U.S. Holders (including individuals) from the sale, exchange or other taxable disposition of ADSs or Class B Shares held more than one year may be eligible for a reduced rate of taxation. The deductibility of capital losses is subject to limitations under the Code.

A U.S. Holder who purchases Class B Shares denominated in Pesos will have an initial tax basis in the Class B Shares equal to the U.S. Dollar value of the Pesos-denominated purchase price determined on the date of purchase. If the Class B Shares are treated as traded on an "established securities market," a cash basis U.S. Holder (or, if it elects, an accrual basis U.S. Holder) will determine the U.S. Dollar value of the cost of such Class B Shares by translating the amount paid at the spot rate of exchange on the settlement date of the purchase. With respect to the sale, exchange or other taxable disposition of Class B Shares, the amount realized generally will be the U.S. Dollar value of the payment received determined on (i) the date of receipt of payment in the case of a cash basis U.S. Holder and (ii) the date of disposition in the case of an accrual basis U.S. Holder. If the Class B Shares are treated as traded on an "established securities market," a cash basis taxpayer (or, if it elects, an accrual basis taxpayer) will determine the U.S. Dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale.

If Argentine income tax is withheld on the sale, exchange or other taxable disposition of ADSs or Class B Shares, the amount realized by a U.S. Holder will include the gross amount of the proceeds of that sale, exchange or other taxable disposition before deduction of the Argentine income tax withheld. Any gain and loss recognized by a U.S. Holder in respect of the sale, exchange or other taxable disposition of ADSs or Class B Shares generally will be treated as derived from U.S. sources for foreign tax credit purposes. Consequently, in the case of a gain from the disposition of ADSs or Class B Shares that is subject to Argentine income tax (see "-Argentine Taxes-Income Taxation" above), the U.S. Holder may not be able to benefit from the foreign tax credit for that Argentine income tax (i.e., because the gain from the disposition would be U.S. source), unless the U.S. Holder can apply the credit against U.S. federal income tax payable on other income from foreign sources. Alternatively, the U.S. Holder may take a deduction for the Argentine income tax, provided that the U.S. Holder elects to deduct all foreign income taxes paid or accrued for the taxable year.

Non-U.S. Holders

Subject to the discussion below under "-Backup Withholding and Information Reporting," a non-U.S. Holder of ADSs or Class B Shares will not be subject to U.S. federal income tax or withholding tax on gain realized on the sale, exchange or other taxable disposition of ADSs or Class B Shares unless (i) such gain is effectively connected with the conduct of a trade or business within the United States by such non-U.S. Holder (and, if an applicable income tax treaty requires, is attributable to a U.S. permanent establishment or fixed base of such non-U.S. Holder) or (ii) such non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met. If the first exception (i) applies, the non-U.S. Holder generally will be subject to U.S. federal income tax with respect to the gain in the same manner as U.S. Holders, as described above, and, in the case of (i), if such non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. If the second exception (ii) applies, the non-U.S. Holder generally will be subject to tax at a rate of 30% on the amount by which the gains derived from the sales that are from U.S. sources exceed capital losses allocable to U.S. sources.

Passive Foreign Investment Company Considerations

Special U.S. federal income tax rules apply to U.S. persons owning shares of a PFIC. A non-U.S. corporation generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries, either (i) 75% or more of its gross income consists of "passive income" or (ii) the average percentage of its assets (by value) that produce or are held for the production of passive income is at least 50%. For these purposes, passive income generally includes, among other things, dividends, interest, rents, royalties, gains from the disposition of passive assets and gains from commodities and securities transactions, other than certain active business gains from the sale of commodities. In determining whether a non-U.S. corporation is a PFIC, a pro rata portion of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.

Based on current estimates of our income and assets, we do not believe that we were classified as a PFIC for U.S. federal income tax purposes for our most recently-ended taxable year, or will be classified for our current taxable year (although the determination cannot be made until the end of such year) and we do not expect that we would become a PFIC in the future, based on our current business plans. However, there can be no assurance in this regard, because the PFIC determination is made annually and is based on the portion of our assets (including goodwill) and income that is characterized as passive under the PFIC rules.

If, contrary to the discussion above, we are or become a PFIC for any taxable year during which a U.S. Holder owns the ADSs or Class B Shares, unless a U.S. Holder elects to be taxed annually on a mark-to-market basis with respect to ADSs or Class B Shares, as described below, any gain realized on a sale, exchange or other taxable disposition of ADSs or Class B Shares and certain "excess distributions" (generally distributions during a taxable year in excess of 125% of the average annual distribution received over a three-year period or shorter holding period for ADSs or Class B Shares) would be treated as realized ratably over the U.S. Holder's holding period, and amounts allocated to prior years while we are a PFIC would be taxed at the highest tax rate in effect for each such year. An additional interest charge may apply to the portion of the U.S. federal income tax liability on such gains or distributions treated under the PFIC rules as having been deferred by the U.S. Holder.

If we are treated as a PFIC and, at any time, we invest in non-U.S. corporations that are classified as PFICs (each, a "lower-tier PFIC"), U.S. Holders generally will be deemed to own, and also would be subject to the PFIC rules with respect to, their indirect ownership interest in that lower-tier PFIC. If we are treated as a PFIC, a U.S. Holder could incur liability for the deferred tax and interest charge described above if either (i) we receive a distribution from, or dispose of all or part of our interest in, the lower-tier PFIC or (ii) the U.S. Holder disposes of all or part of its ADSs or Class B Shares.

A U.S. Holder of stock in a PFIC may make a "mark-to-market" election, provided the PFIC stock is "marketable stock" as defined under applicable Treasury Regulations (i.e. "regularly traded" on a "qualified exchange or other market"). A "qualified exchange" includes a national securities exchange that is registered with the SEC or the national market system established under the Securities Exchange Act of 1934 (such as the New York Stock Exchange). PFIC stock traded on a qualified exchange is regularly traded on such exchange for any calendar year during which such stock is traded, other than inde minimis quantities, on at least 15 days during each calendar quarter. We cannot assure U.S. Holders that our ADSs or Class B Shares will be treated as "marketable stock" for any taxable year.

If an effective mark-to-market election is made, an electing U.S. Holder generally would (i) include in gross income, entirely as ordinary income, an amount equal to the excess, if any, of the fair market value of the PFIC stock as of the close of such taxable year and such holder's adjusted tax basis, and (ii) deduct as an ordinary loss the excess, if any, of such holder's adjusted tax basis in the PFIC stock over the fair market value of such stock at the end of the taxable year, but only to the extent of the net amount previously included in gross income as a result of the mark-to-market election. Any gain or loss on an actual sale of ADSs or Class B Shares would be ordinary gain or loss, except any loss in excess of previously included mark-to-market income not offset by previously deducted decreases in value would be a capital loss. A U.S. Holder's tax basis in the ADSs or Class B Shares would increase or decrease by the amount of the gain or loss taken into account under the mark-to-market regime. Although a U.S. Holder may be eligible to make a mark-to-market election with respect to its ADSs or Class B Shares, no such election may be made with respect to the stock of any lower-tier PFIC that such U.S. Holder is treated as owning, because such lower-tier PFIC stock may not be considered to be regularly traded on a qualified exchange or other market. Consequently, the PFIC rules could apply with respect to income of a lower-tier PFIC, the value of which would already have been taken into account indirectly via mark-to-market adjustments in respect of ADSs or Class B Shares. The mark-to-market election is made with respect to marketable stock in a PFIC on a stockholder-by stockholder basis and, once made, can only be revoked with the consent of the IRS. Special rules would apply if the mark-to-market election is not made for the first taxable year in which a U.S. person owns stock of a PFIC.

A U.S. Holder who owns ADSs or Class B Shares during any taxable year during which we are treated as a PFIC may be required to file IRS Form 8621, reporting any distributions received and gains realized with respect to each PFIC (including lower-tier PFICs) in which the U.S. Holder holds a direct or indirect interest. If we are deemed to be a PFIC for a taxable year, dividends on ADSs and Class B Shares would not constitute "qualified dividend income" subject to preferential rates of U.S. federal income tax, as discussed above. U.S. Holders should also be aware that recently enacted legislation would impose an additional annual filing requirement for U.S. persons owning shares of a PFIC. The legislation does not describe what information would be required to be included in the additional annual filing, but grants the Secretary of the U.S. Treasury Department power to make this determination.

U.S. Holders should consult their own independent tax advisors regarding the potential application of the PFIC rules to their ownership of the ADSs or Class B Shares, the availability and advisability of making a mark-to-market election should we be considered a PFIC for any taxable year and the application of the recently enacted legislation to their particular situation.

Backup Withholding and Information Reporting

Dividends paid on, and proceeds from the sale, exchange or other taxable disposition of, ADSs or Class B Shares to a U.S. Holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding of U.S. federal income tax (currently at a rate of 28.0%) unless the U.S. Holder (i) provides an accurate taxpayer identification number and certifies that it is a U.S. person and that no loss of exemption from backup withholding has occurred or (ii) is an exempt recipient. The amount of any backup withholding collected from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder's U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that certain required information is timely furnished to the IRS.

In addition, U.S. Holders should be aware that recently enacted legislation imposes new reporting requirements with respect to the holding of certain foreign financial assets, including stock of foreign issuers which is not held in an account maintained by certain financial institutions, if the aggregate value of all of such assets exceeds US$50,000. U.S. Holders should consult their own tax advisors regarding the application of the information reporting rules to ADSs or Class B Shares and the application of the recently enacted legislation to their particular situations.

Non-U.S. Holders generally will not be subject to information reporting and backup withholding tax, but may be required to comply with certain certification and identification procedures in order to establish their eligibility for such exemption.

THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT ABOVE IS FOR GENERAL INFORMATION PURPOSES ONLY. PROSPECTIVE PURCHASERS OF CLASS B SHARES OR ADSs ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING OR DISPOSING OF ADSs OR CLASS B SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, NON-U.S. AND OTHER U.S. FEDERAL TAX LAWS AND POSSIBLE CHANGES IN TAX LAWS.

Dividends and Paying Agents

See Item 8: "Financial Information-Consolidated Statements and Other Financial Information-Dividend Policy."

Statement by Experts

Not Applicable.

Documents on Display

We file annual reports on Form 20-F and furnish periodic reports on Form 6-K to the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. Anyone may read and copy any of these reports at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Information on the operation of the public reference rooms is available by calling 1-800-SEC-0330. Documents filed since October 1, 2002 can be found on the EDGAR system on the SEC website, www.sec.gov.

Anyone may request a copy of these filings by writing to Gregorio Araoz de Lamadrid 1360, (1267) Buenos Aires, Argentina, attention: Investor Relations Office or calling us at (54)(11) 4309-1381.

Subsidiary Information

Not Applicable.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risk, including changes in foreign exchange rates and interest rates, in the normal course of our business. We do not hold or issue derivative financial instruments for trading purposes. We do not expect that our results of operations or liquidity will be materially affected by the use of derivative financial instruments, if any.

Interest rate exposure

Our exposure to market risk for changes in interest rates relates primarily to our debt obligations. Our financial debt bears interest at fixed rates.

Foreign exchange exposure

We realize substantially all of our revenues in Argentina are in Pesos. Accordingly, our earnings are subject to exposure to adverse movements in currency exchange rates, primarily related to our U.S. Dollar-denominated debt and Euro-denominated debt.

From April 1, 1991 until the beginning of 2002, the Convertibility Law was applicable in Argentina. This law established a fixed exchange rate under which the Central Bank was required to sell U.S. Dollars to any person at a fixed rate of Ps. 1.00 per US$ 1.00, resulting in no significant fluctuations in the exchange rate between Pesos and Dollars. In addition, our tariffs were expressed in Dollars and were billed in Pesos at prevailing exchange rates and were subject to periodic adjustments to reflect inflation as measured by the U.S. PPI.

In early 2002, however, the Public Emergency Law and related measures effectively devalued and floated the Peso, converted our Dollar-denominated tariffs to Pesos at the rate of Ps. 1.00 to US$ 1.00 and eliminated all adjustments to our tariffs. These changes have increased dramatically the Peso value of our foreign currency denominated financial debt to Ps. 1,357.1 million at December 31, 2002 from Ps. 424.9 million at December 31, 2001 before adjustment for inflation. As of December 31, 2010, our foreign-denominated financial debt, registered under "reorganization liability," amounted to Ps. 1,034.6 million. As of December 31, 2009 and 2008, our foreign-denominated financial debt, registered at present value and including accrued interest payable, amounted to Ps. 920.6 million and Ps. 815.3 million, respectively.

Our foreign exchange net loss during 2010, 2009 and 2008 were Ps. 38.0 million, Ps. 85.3 million and Ps. 66.7 million, respectively.

The table below provides information about our financial debt (includes restructured debt and holdouts) as of December 31, 2010 that may be sensitive to changes in interest rates and foreign exchange:

					Expected Maturity Date⁽⁶⁾
	2010	Interest Rate	Fair Value⁽⁷⁾		Without due date	2011		2012		2013	2014	2015	More than 5 years
	Thousands of Ps.		Thousands of Ps.
Negotiable Obligations US$

Series 1⁽⁴⁾	838,322	8%⁽¹⁾	377,245	838,322			-		-	-	-	-	-
Series 2 Class A⁽⁵⁾	24,869	5%⁽²⁾	11,191	24,869			-		-	-	-	-	-
Interest payables	31,498			31,498
Total Negotiable Obligations US$	894,689
Negotiable Obligations Euros

Series 2 Class B⁽⁵⁾	137,459	3.8%⁽³⁾	61,857	137,459			-		-	-	-	-	-
Interest payables	2,409
Total Negotiable Obligations Euros	139,868

Total Negotiable Obligations	1,034,556

Total Non current financial debt	1,034,556

(1) Interest rates for this series are 8% for the years 2008-2010 and 9% subsequently.

(2) Interest rates for this series are 4 % for the year 2008, 5% for the years 2009-2010, 7% for the years 2011-2012 and 8% subsequently.

(3) Interest rates for this series are 2.8% for the year 2008, 3.8% for the years 2009-2010, 5.8% for the years 2011-2012 and 6.8% for the years 2013-2014.

(4) The amortization schedule for the principal amount of this series is the following: 5% on June 30 and December 31, 2010, 10% each subsequent June 30, and December 31 until December 31, 2012 and 12.5% each subsequent June 30 and December 31 until December 31, 2014.

(5) The amortization schedule for the principal amount of this series is the following: 16-2/3% on June 30 and December 31, 2012, 16 2/3% each subsequent June 30 and December 31 until December 31, 2014.

(6) On June 17, 2010, we filed a petition for voluntary reorganization (concurso preventivo) in an Argentine court. This reorganization filing generated an event of default under our outstanding debt obligations. Pursuant to the terms of our outstanding debt obligations, this default resulted in the automatic acceleration of our outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on our outstanding debt obligations. See Item 3: "Key Information-Risk Factors Relating to Us-Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors have issued an opinion that contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern."

(7) As December 31, 2010, the functional currency fair value is higher than in 2009 due to the devaluation of the Argentine peso against the dollar / euro, and not to changes in fair value measured in foreign currency.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Debt Securities

Not Applicable.

Warrants and Rights

Not Applicable.

Other Securities

Not Applicable.

American Depositary Receipts

Fees and Charges of ADS Holders

Our Depositary is the Bank of New York Mellon (or, the "Depositary"). The Depositary collects its fees for delivery and surrender of ADSs directly from (i) investors depositing shares or surrendering ADSs for the purpose of withdrawal or (ii) intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for depositary services by (i) deducting from cash distributions, (ii) directly billing investors or (iii) charging the book-entry system accounts of participants acting for them. The Depositary may generally refuse to provide fee-generating services until after its fees for such services have been paid.

Below is a summary of the fees and charges that a holder of ADSs may have to pay, either directly or indirectly:

Category of Service	Associated Fee	Depositary Actions
(a) Deposit or substituting the underlying shares	$0.05 per ADS	Issuance of ADSs, including issuances resulting from deposits in respect of share distributions, rights and other property distributions Surrender of ADRs for the withdrawal of deposited securities, including such surrendering if the deposit agreement were to terminate
(b) Receiving or distributing dividends	$0.02 per ADS	Any cash distribution (dividends) to registered holders of ADSs
(c) Selling or Exercising Rights	$0.05 per ADS, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities.	Distribution or sale of securities
(d) Transferring and/or Registering an underlying security	Registration or transfer fees	Transfer and registration of shares on our share register to or from the name of the Depositary or its agent when shares have been deposited or withdrawn
(e) Expenses of the Depositary	Expenses payable at the sole discretion of the Depositary.	Expenses incurred on behalf of holders in connection with: i) Stock transfer or other taxes and other governmental charges. ii) Cable, telex and facsimile transmission and delivery. iii) Expenses of Depositary in connection with the conversion of foreign currency into US dollars iv) Such fees and expenses as are incurred by the Depositary in delivery of deposited securities or otherwise in connection with the Depositary's or its custodian's compliance with applicable law, rule or regulation.

Fees and other Payments Made by the Depositary

The Depositary has agreed to reimburse or pay, on behalf of MetroGAS, certain reasonable expenses related to our ADS program and incurred by us in connection with the program (such as NYSE listing fees, legal fees and ongoing SEC compliance and listing requirements, distribution of proxy materials, investor relations expenses, etc). The Depositary has covered all such expenses incurred by us during 2010 and reimbursed us in the amount totaling US$ 38,000, such amount is not related to the fees collected by the Depositary from our ADS holders.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

On March 25, 2002, we announced the suspension of principal and interest payments on all of our financial indebtedness.

On May 17, 2006, we announced the closing, in an out-of-court agreement, of the restructuring of US$ 93,808,000 principal amount (approximately 94%) of our 9-7/8% Series A Notes due 2003, Euros 95,143,000 principal amount (approximately 87%) of our 7.375% Series B Notes due 2002, US$ 130,000,000 principal amount (100%) of our Floating Rate Series C Notes due 2004 and US$ 50,000,000 (100%) and Ps. 44,060,576 (100%) principal amount of our other unsecured financial indebtedness. The restructuring was concluded in accordance with our solicitations of powers of attorney authorizing, among other things, the out-of-court sale on behalf of the debt holders of the existing debt for cash and/or the exchange of the existing debt for new debt and equity securities (the "Solicitations"). We further announced that, after giving effect to the issuance of the Series 1 Notes and Series 2 Notes and the retirement of the existing debt that had been exchanged for Series 1 Notes and Series 2 Notes or repurchased by us, our aggregated unsecured financial indebtedness amounted to US$ 299,700,226 (including the equivalent of US$ 23,693,187 principal amount of the existing debt the holders of which have not participated in the restructuring) based on exchange rates on May 11, 2006.

The adverse financial conditions we face as a result of this continued delay in our tariff and license negotiation led our Board of Directors to approve our filing of a petition for voluntary reorganization (concurso preventivo) in an Argentine court on June 17, 2010. This reorganization filing generated an event of default under our outstanding debt obligations. Pursuant to the terms of our outstanding debt obligations, this default resulted in the automatic acceleration of our outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on our outstanding debt obligations. See Item 3: "Key Information-Risk Factors-Risk Factors Relating to Us-Our tariff and license negotiation with the Argentine Government has not concluded and consequently, we are facing financial difficulties that have led us to file a petition for voluntary reorganization (concurso preventivo) in an Argentine court. As a result our auditors have issued an opinion that contains an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern."

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

We amended our By-Laws to provide that we would not be subject to the mandatory tender offer regime contemplated by Decree No. 677/01 and to permit meetings of our shareholders to be conducted without their being physically present. See Item 10: "Additional Information-Memorandum and Articles of Association-Last Amendments to Our By-Laws."

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of the chief executive officer and chief financial officer, conducted an evaluation, pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. Based upon, and as of the date of our evaluation, our chief executive officer and our chief financial officer concluded that as of the end of the period covered by the report, our disclosure controls and procedures were effective in all material respects to ensure that information required to be disclosed in the reports that we file and submit under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, is recorded, processed, summarized and reported as and when required and it is accumulated and communicated to the Company's Management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management's Annual Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company's internal control was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company's management, including out Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2010. In making this assessment, it used the criteria established in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its evaluation and those criteria, management has concluded that the Company's internal control over financial reporting was effective as of the end of the period covered by the report.

This annual report does not include an attestation report of the company's registered public accounting firm on management's assessment of the Company's internal control over financial reporting based on Item 15(c) of the SEC's Form 20-F, which only requires an attestation report where the Form 20-F is being used as an annual report if the Company is (1) an accelerated filer or (2) a large accelerated filer. As of December 31, 2010 and the date of this annual report, MetroGAS is a non-accelerated filer.

Changes in Internal Control

There have been no changes in our internal controls over financial reporting or in other factors during the the period covered by this annual report that have materially affected, or is reasonably likely to materially affect, internal controls over financial reporting.

[Reserved]

ITEM 16A. Audit Committee Financial Expert

Our Board of Directors has determined that Héctor Caram, a member of our Audit and Control Committee, meets the requirements of an "audit committee financial expert," as defined by the SEC.

See Item 6: "Directors, Senior Management and Employees-Directors and Senior Management-Audit Committee."

ITEM 16B. Code of Ethics

We currently have a code of ethics which applies to our principal executive officer, principal financial officer, and principal accounting officer and/or controller, or persons performing similar functions that complies with the requirements of U.S. and Argentine law. Our Code of Ethics is available on our website at www.metrogas.com.ar.

ITEM 16C. Principal Accountant Fees and Services

pwc acted as our independent registered public accounting firm for the years 2010 and 2009. The table below sets forth the fees for services performed by pwc, an independent registered public accounting firm for the years 2010 and 2009 (including related expenses), and categorized by service in Pesos.

	Year Ended December 31,
	2010	2009
	(in Pesos)
Audit Fees	1,187,069	1,036,928
Audit-Related Fees	221,900	142,600
Tax Fees	102,492	154,520
All Other Fees	-	-
Total	1,511,461	1,334,048

Audit Fees

Audit fees are fees agreed upon with pwc for the years 2010 and 2009 (including related expenses) for the audit of our annual consolidated financial statements, for the audit of internal control over financial reporting and for the reviews of our quarterly consolidated financial statements submitted on Form 6-K, including the review of our annual report on Form 20-F, other SEC and CNV presentations (such as the offering circulars for the exchange offers), certification of filings before governmental offices, etc.

Audit-Related Fees

Audit-related fees in 2010 and 2009 include fees related to attestations derived from requirements of ENARGAS and other tax and regulatory authorities (i.e.: Banco Central de la Republica Argentina, AFIP, etc.).

Tax Fees

Tax fees in 2010 and 2009 were related to services agreed-upon for tax compliance.

Our Board of Directors has established a policy of pre-approval of audit and permissible non-audit services that shall ensure that the engagement of external auditors preserves their capacity as independent professionals, which is inherent in the performance of their functions. In this respect, we acknowledge that good corporate governance principles, which stand as the basis of confidence of shareholders and other investors, include the maintenance of the independence of the accounting auditing firms.

Therefore, the Board has established the guidelines for a formal policy which will establish the basis for the engagement of our external auditor to provide audit services and permissible non-audit services. These guidelines include:

Service categories: the services to be provided by the external auditing firms shall be classified into the following categories:

Permitted Services

External audit and related services: These services are inherent to the role of an independent auditor and include the review and interpretation of accounting principles and their application, the review of adequate support to financing, similar transactions and other services disclosed in our annual reports or financial statements on which the external auditors shall issue an opinion. These services shall be pre-approved by the Audit Committee on an annual basis.

Taxes: Although these services are expressly permitted and do not have an adverse effect on the independence of external auditors, an assessment of the consulting firm ultimately engaged shall be made in each case. However, services related to the review of the annual taxes to be presented to the tax agencies are considered to be pre-approved.

Services requiring specific approval: Other services requiring specific approvals are services which are specifically permitted and do not affect the independence of external auditors, but are not related to external audit services or services with regard to taxes. All such other services do require pre-approval by the Audit Committee (or by the Board) prior to engagement. This pre-approval shall be granted whenever the participation of an auditing firm is proposed for its approval for an audit job to be rendered to us for which the quoting of professional services is required. For this purpose, the Audit Committee shall pre-approve such services or the pre-approval shall be required from the Director appointed for that purpose.

Non-permitted Services:Non-permitted services are those services that may not be provided by auditing firms as they are considered incompatible with the role of an independent auditor.

Extension of the policy and approval intervals: this policy applies to us and the changes introduced to applicable regulations shall determine the need to review it on an annual basis or at certain required periods in accordance with such changes.

Responsibility: the Audit Committee or the Board of Directors bear the responsibility for ensuring that our external auditors are engaged only to provide such services as may be compatible with the maintenance of their independence.

Reporting Duties: upon the implementation of this policy, pwc or any other external auditing firm, as the case may be, shall report to us annually regarding the services provided during the year, which shall qualify under pre-approved categories, for assessment by our Board of the compliance with the conditions of independence for the provision of services in accordance with the policy defined herein, local regulations and applicable U.S. legislation. We shall, in turn, prepare a detail of the fees paid to pwc or to any other auditing firm, as the case may be, for auditing and other services provided, for inclusion in the annual financial statements or annual reports.

Delegation: the power to grant pre-approvals of permitted services according to applicable regulations shall be granted to a Board member fulfilling the independence requirements. These decisions shall be reported to the Board during the first meeting convened after the granting of pre-approval.

Approval of services: external auditing and other related services and tax services were pre-approved by the Board of Directors in detail. The audit committee approved 3% of the services performed by the auditors pursuant to the "minimis" exception prior to completion of the auditors' engagement.

All Other Fees

None.

ITEM 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

ITEM 16F. Change in Registrant's Certifying Accountant

Not applicable.

ITEM 16G. Corporate Governance

Since November 17, 2004, our Class B Shares have been listed on the BCBA and we follow their corporate governance practices. Our American Depository Shares have been listed on the NYSE since November 17, 2004 and therefore we must follow certain of their corporate governance guidelines as well. Under NYSE corporate governance requirements, we are required to disclose any significant ways in which the BCBA's corporate governance practices differ from those followed by U.S. companies in accordance with the NYSE rules. See Item 10: "Additional Information-NYSE Corporate Governance" for more detail on these material differences.

FINANCIAL STATEMENTS

Not Applicable.

FINANCIAL STATEMENTS

See pages F-1 through F-77.

EXHIBITS

Exhibit No.	Description
1.1	English translation of the By-Laws as amended to the date of filing, incorporated by reference to Exhibit 1.1 to MetroGAS S.A.'s Annual Report on Form 20-F for the fiscal year ended December 31, 2005 (the "2005 Form 20-F")
2.1	Supplemental Indenture for Series 1 Notes and Series 2 Notes (Supplemental to Indenture dated September 8, 1999 as amended), incorporated by reference to Exhibit 2.1 to the 2005 Form 20-F.
12.1	Section 302 Certification of the Chief Executive Officer.
12.2	Section 302 Certification of the Chief Financial Officer.
13.1	Section 906 Certification of Chief Executive Officer.
13.2	Section 906 Certification of Chief Financial Officer.

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

METROGAS S.A.

By:/s/ Andrés Cordero
Name: Andrés Cordero
Title: Chief Executive Officer

Date: April 28, 2011

DO NOT DELETE. This text is hidden and will not appear in the printed document. This heading is inserted for page numbering purposes only

METROGAS S.A.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2010 and 2009	F-3

Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008	F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008	F-5

Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2010, 2009 and 2008	F-6

Notes to Consolidated Financial Statements	F-7

Ps.: Argentine Pesos

US$: U.S. Dollars

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

MetroGAS S.A.

We have audited the accompanying consolidated balance sheets of MetroGAS S.A. at December 31, 2010 and 2009, and the related consolidated statements of operations, of changes in shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MetroGAS S.A. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in Argentina.

Accounting principles generally accepted in Argentina vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Notes 17 to 20 to the consolidated financial statements.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As indicated in Note 2, the uncertainties related to the suspension of the original regime for tariff adjustments and the Company's petition for voluntary reorganization in an Argentine Court on June 17, 2010 raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 2.The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

PRICE WATERHOUSE & CO. S.R.L.

By (Partner)

Carlos N. Martinez

Buenos Aires, Argentina

March 3, 2011 (except with respect to the

matters discussed from Notes 17 to 20 to the

consolidated financial statements, as to which the date is April 28, 2011)

METROGAS S.A.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2010 AND 2009

(In thousands of Argentine Pesos unless otherwise indicated)

	December 31,
	2010	2009
ASSETS
CURRENT ASSETS
Cash and banks (Note 5 a))	49,559		63,562
Investments (Note 5 b))	261,789		64,723
Trade receivables, net (Note 5 c))	207,305		168,455
Other receivables (Note 5 d))	13,319		14,374
Inventories, net (Note 5 e))	4,592		3,834
Total current assets	536,564		314,948

NON - CURRENT ASSETS
Investments (Note 5 f))	668		371
Other receivables (Note 5 g))	250,791		221,986
Fixed assets, net (Note 5 h))	1,722,877		1,688,430
Total non - current assets	1,974,336		1,910,787
Total assets	2,510,900		2,225,735

LIABILITIES
CURRENT LIABILITIES
Accounts payable (Note 5 i))	307,824		238,050
Financial debt (Note 5 j))	-		82,777
Payroll and social security payable	29,245		23,052
Taxes payable (Note 5 k))	37,699		56,219
Other liabilities	9,195		8,080
Contingencies provision (Note 21 d))	79,098		70,776
Total current liabilities	463,061		478,954

NON - CURRENT LIABILITIES
Financial debt (Note 5 l))	-		837,857
Taxes payable	-		9,977
Reorganization liabilities (Note 5 m))	1,220,331		-
Total non - current liabilities	1,220,331		847,834
Total liabilities	1,683,392		1,326,788
MINORITY INTEREST	1,604		1,346
SHAREHOLDERS' EQUITY (as per related statement)	825,904		897,601
Total	2,510,900		2,225,735

The accompanying notes 1 to 21 are an integral part of these consolidated financial statements.

METROGAS S.A.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

(In thousands of Argentine Pesos, except per share and per ADS data and unless otherwise indicated)

	December 31,
	2010	2009	2008

Sales (Note 5 n))	1,122,328	1,074,227	901,564
Operating cost (Note 21 c))	(809,188)	(769,584)	(612,953)
Gross profit	313,140	304,643	288,611

Administrative expenses (Note 21 b))	(123,831)	(97,659)	(83,037)
Selling expenses (Note 21 b))	(132,837)	(112,898)	(88,336)
Operating income	56,472	94,086	117,238

Financing and holding results generated by assets
Holding results	5,115	2,779	744
Result on present-valuing long term other receivables	(34,293)	(1,482)	3,558
Interest on commercial operations	4,874	9,531	6,956
Interest on financial operations	311	1,733	6,611
Exchange gain (loss) on commercial operation	815	(747)	2,276
Exchange (loss) gain on financial operation	(2,651)	2,263	427

Financing and holding results generated by liabilities
Interest on commercial operations	(495)	316	(452)
Interest on financial operations	(33,137)	(69,717)	(59,184)
Result on present-valuing long term financial debt	(48,003)	(18,524)	(16,247)
Exchange loss on commercial operations	(706)	(1,859)	(980)
Exchange loss on financial operations	(35,380)	(87,610)	(67,145)
Others	(3,191)	(7,469)	(6,708)

Other income, net	6,005	8,048	1,408
Minority interest	(258)	(298)	(245)
Loss before income tax	(84,522)	(68,950)	(11,743)
Income tax gain (loss) (Note 3.6.h)	12,825	(9,392)	(1,806)
Net loss for the year	(71,697)	(78,342)	(13,549)


Loss per share (Notes 3.7 and 19 b))	(0.13)	(0.14)	(0.02)

Loss per ADS (Notes 3.7 and 19 b))	(1.26)	(1.38)	(0.24)

The accompanying notes 1 to 21 are an integral part of these consolidated financial statements.

METROGAS S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

(In thousands of Argentine Pesos unless otherwise indicated)

	December 31,
	2010		2009		2008
Cash flows from operating activities
Net loss for the year	(71,697)	(78,342)		(13,549)
Interest expense on financial debt accrued	33,137	69,717		59,184
Income tax accrued	(12,825)	9,392		1,806

Adjustments to reconcile net income to cash flows provided by operating activities
Minority interest	258	298		245
Depreciation of fixed assets	74,421	71,331		69,168
Net book value of fixed assets written off	1,574	(243)		1,271
Allowance for doubtful accounts	6,973	8,174		1,259
Allowance for inventory obsolescence	43	167		140
Allowance for disposal of fixed assets	8,581	7,439		5,767
Contingencies provision	9,464	10,445		12,702
Materials consumed	3,966	8,009		2,728
Exchange loss on financial operations	35,380	87,610		67,145
Result on present-valuing long term financial debt	48,003	18,524		16,247
Result on present-valuing long term other receivables	34,293	1,482		(3,558)
Other financial results	(2,565)	-		-

Changes in assets and liabilities
Trade receivables	(45,823)	(2,467)		(26,497)
Other receivables	(32,111)	(26,923)		(20,873)
Inventories	(4,679)	(8,244)		(3,369)
Non current investments	(297)	(52)		(36)
Accounts payable	206,527	77,729		17,294
Payroll and social security payable	9,727	4,742		4,817
Taxes payable	13,598	(1,565)		(8,073)
Other liabilities	1,140	1,768		(1,120)
Contingencies provision	(1,142)	(401)		(744)
Minimum presumed income tax paid	(13,741)	(7,162)		(9,606)
Net cash provided by operating activities	302,205	251,428		172,348

Cash flows used in investing activities
Purchase of fixed assets	(119,111)	(105,756)		(84,169)
Net cash used in investing activities	(119,111)	(105,756)		(84,169)

Cash flows used in financing activities
Bank overdraft	(31)	31		416
Payment of loans	-	-		(3,260)
Interest paid	-	(70,574)		(61,212)
Net cash used in financing activities	(31)	(70,543)		(64,056)

Increase in cash and cash equivalents	183,063	75,129		24,123
Cash and cash equivalents at the beginning of the year	128,285	53,156		29,033
Cash and cash equivalents at the end of the year (1)	311,348	128,285		53,156

The accompanying notes 1 to 21 are an integral part of these consolidated financial statements.

(1) Includes Ps. 67,427 thousands, Ps. 54,106 thousands and Ps. 27,087 thousands as of December 31, 2010, 2009 and 2008 related to cash deposited in the trust funds in January 2011, 2010 and 2009, respectively.

METROGAS S.A.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

(In thousands of Argentine Pesos unless otherwise indicated)

	SHAREHOLDERS' CONTRIBUTIONS		UNAPPROPRIATED RESULTS
	COMMON STOCK NOMINAL VALUE	CUMULATIVE INFLATION ADJUSTMENT TO COMMON STOCK	LEGAL RESERVE	ACCUMULATED DEFICIT	TOTAL SHAREHOLDERS' EQUITY
	COMMON STOCK NOMINAL VALUE	CUMULATIVE INFLATION ADJUSTMENT TO COMMON STOCK	LEGAL RESERVE	ACCUMULATED DEFICIT	TOTAL SHAREHOLDERS' EQUITY


Balance as of December 31, 2007	569,171	684,769	45,376	(309,824)	989,492

Net loss for the year	-	-	-	(13,549)	(13,549)

Balance as of December 31, 2008	569,171	684,769	45,376	(323,373)	975,943

Net loss for the year	-	-	-	(78,342)	(78,342)

Balance as of December 31, 2009	569,171	684,769	45,376	(401,715)	897,601

Net loss for the year	-	-	-	(71,697)	(71,697)

Balance as of December 31, 2010	569,171	684,769	45,376	(473,412)	825,904

The accompanying notes 1 to 21 are an integral part of these consolidated financial statements.

NOTE 1 - THE COMPANY'S BUSINESS

MetroGAS S.A. (the "Company" or "MetroGAS"), a gas distribution company, was incorporated on November 24, 1992 and began operations on December 29, 1992, when the privatization of Gas del Estado S.E. ("GdE") (an Argentine Government-owned enterprise) was completed.

Through Executive Decree No. 2,459/92 dated December 21, 1992, the Argentine Government granted MetroGAS an exclusive license to provide the public service of natural gas distribution in the area of the City of Buenos Aires and southern and eastern Greater Buenos Aires, by operating the assets allocated to the Company by GdE for a 35-year period from December 28, 1992 (the "Takeover Date"). This period can be extended for an additional 10-year period under certain conditions.

MetroGAS' controlling shareholder is Gas Argentino S.A. ("Gas Argentino") who holds 70% of the common stock of the Company; 20% of the Company's common stock, which was originally owned by the Argentine Government, was offered to the public as described in Note 11. The remaining 10% is owned by thePrograma de Propiedad Participada(Employee Stock Ownership Plan, or "PPP") (Note 14).

As further described in Note 2, Note 9 and Note 15, the conditions under which the Company develops its activity and its regulatory framework have been significantly modified.

NOTE 2 - EMERGENCY LAW - IMPACT ON THE COMPANY'S BUSINESS

Since December 2001, the Government has adopted a number of measures in order to alleviate the crisis the country was undergoing, which implied a deep change in the economic model effective so far.

The most important measures passed have been: (i) the implementation of a floating rate of exchange that resulted in a significant devaluation during the first months of 2002, (ii) the pesification of certain assets and liabilities in foreign currency deposited in the country, and (iii) the pesification of public services prices and tariffs.

As part of the mentioned measures, on January 9, 2002, Law No. 25,561 - Public Emergency Law (the "Emergency Law") was enacted and was subsequently supplemented by other Laws, decrees and regulations issued by different Government entities. This group of rules led to a substantial change in terms of the license and its relation with the National Government, modifying the program of tariff rewards accorded in the Law No. 24,076 (or "Gas Act") and its complementary regulations.

The Emergency Law authorized the Government to renegotiate public utility licenses taking into account the following: (a) the impact of the tariffs on the competitiveness of the economy, (b) the quality of services and the contractually required investment programs, (c) the interest of users as well as service access conditions, (d) the safety of the systems involved, and (e) the company profitability. The evolution of the Company's tariff renegotiation with the Government is described in Note 9.

NOTE 2 - EMERGENCY LAW - IMPACT ON THE COMPANY'S BUSINESS (Contd.)

On October 1, 2008, pursuant to the renegotiation process of public service contracts and licenses established by Public Emergency Law No. 25,561, we signed a Transition Agreement with UNIREN (Unidad de Renegociación y Análisis de Contratos de Servicio Públicos), which was approved by the Executive Power on April 14, 2009 through Decree No. 234/09. Despite this fact, the Company's tariffs have been frozen for twelve years. The tariff schedule resulting from the Transition Agreement has yet not been approved by ENARGAS (Ente Nacional Regulador del Gas) and is still being reviewed by the MPFIPS (Ministerio de Planificación Federal, Inversión Pública y Servicios). In addition, neither MPFIPS nor the ENARGAS has granted to MetroGAS the pass through to tariffs of municipal levies, contributions and other charges, which significantly and increasingly impacts our cash flow generation. It is worth mentioning that all of the increases granted for customer categories, which the Company has invoiced to its customers, have had no effect on the Company's income because the resources have been used to expand the main gas pipeline capacity, compensate for natural gas price increases from producers and to pay for natural gas imports necessary due to the volume of internal demand. Moreover, for the past twelve years, the Company has operated with frozen tariffs and has not received any subsidies from the Government. Since 2001, operating costs have been increased more than 281%.

Despite this, MetroGAS was able to successfully restructure its foreign currency financial debt as a result of the voluntary tender offer in 2006. However, despite the fact that the Company hired a financial advisor to find alternatives that would allow the renegotiation of its financial debt, the proposed actions have not been successful. As a result, the Company has not been able to generate enough free cash flow to meet its financial debt payments or the funds needed to pay its commercial and fiscal obligations.

It is worth noting that MetroGAS is fully operational and maintains the quality of its services.

On February 17, 2010, MetroGAS commenced a legal proceeding in the Federal Administrative Court of Appeals requiring the issuance of an order of action against the Sub-Secretary of Coordination and Management Control of the MPFIPS for its delay in reviewing the proposed MetroGAS tariff schedules. However, on June 6, 2010, MetroGAS terminated this legal claim and commenced a new action before the Federal Administrative Court to require the issuance of an order of action against ENARGAS and the Sub-secretary of Coordination and Management Control, by which they would be obliged to publish the new tariff schedules. As of the date of issuance of these financial statements, there has been no action on the part of the Sub-secretary of Coordination and Management Control and ENARGAS has not yet issued the proposed MetroGAS tariff schedules.

Consequently, as of December 31, 2010, the Company has neither recorded nor invoiced the effects of the Transition Agreement.

NOTE 2 - EMERGENCY LAW - IMPACT ON THE COMPANY'S BUSINESS (Contd.)

Voluntary Reorganization Proceeding (concurso preventivo)

The adverse financial conditions that MetroGAS faces as a result of its frozen tariffs, no reallocation on tariffs of municipal rates and the increase of expenses resulting from operations, administration and commercialization resulted in its Board of Directors approving the Company's filing of a petition for voluntary reorganization (concurso preventivo) in an Argentine court on June 17, 2010. This reorganization filing constituted an event of default under the Company's outstanding debt obligations and, pursuant to the terms of its outstanding debt obligations, resulted in the automatic acceleration of its outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on its outstanding debt obligations.

As a result of this reorganization procedure, MetroGAS continues to operate its business as a debtor-in-possession under a court-appointed supervisor (thesíndico concursal). On July 15, 2010, the Court admitted the reorganization proceeding. The Company's Shareholders Meeting held on August 2, 2010 ratified the decision made by the Board of Directors. Among the relevant measures, the following may be pointed out: a) The end of the proof of claim period was fixed for November 10, 2010; b) the deadline by which thesindico concursalmust issue a report about each individual claim was fixed for February 22, 2011; c) the deadline by which MetroGAS must establish classification of creditors' claims was fixed for April 20, 2011; d) the deadline by which thesindico concursalmust issue a report about MetroGAS' general financial situation was fixed for May 20, 2011; and e) the end of the exclusivity period, the period during which MetroGAS may submit a proposal to each creditor individual, was fixed for March 9, 2012.

The filing for a reorganization proceeding includes, among others, the following consequences:

unsecured debt due or not due for services rendered prior to the filing for the reorganization proceeding shall be subject to the case procedure, and therefore shall not be paid up to the date set in the ultimately agreed proposal.

the suspension of interest payments, and

the impossibility of filing for new legal actions against the Company for causes or claims prior to the filing date.

The suspension of current actions against the Company.

The debts included in the reorganization procedure, which may be subject to positive or negative adjustments after the corresponding proofs of claim, are set forth in our balance sheet in our current financial statements under the line-item "Reorganization Liabilities". These liabilities are considered long-term liabilities, given the aforementioned deadlines in addition to the fact that the reorganization procedure has not yet ended. Long-term liabilities also include commercial, tax, financial and social debts, among others.

As of the date of issuance of these financial statements, the proof of claim period has expired and the deadline by which thesíndicoconcursalmust issue a report about each individual claim has passed. The report has been issued and the court has issued a resolution pursuant to Article No. 36 of the Bankruptcy Law, which approved said claims. The submission of the general report of the síndicoconcursalremains pending. It is impossible to foresee the outcome of the process or to determine its impact on the Company's results and operations.

NOTE 2 - EMERGENCY LAW - IMPACT ON THE COMPANY'S BUSINESS (Contd.)

After this decision is rendered, MetroGAS will have 90 days to propose a reorganization plan to each class of creditors and obtain approval therefrom. If MetroGAS obtains approval from (i) a majority of creditors in each class and (ii) that majority holds more than 66.6% of the outstanding obligations in each class, the proposed plan becomes the reorganization agreement. Such reorganization agreement would then limit the Company's actions until the court declares MetroGAS to be in full compliance with the terms thereof and the reorganization proceeding is officially terminated. Should MetroGAS fail to fully comply with the terms of the reorganization agreement, MetroGAS' creditors can request and obtain a declaration of bankruptcy against the Company.

MetroGAS' Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern. As of the date of these financial statements, it is not possible to predict the outcome of the voluntary reorganization proceeding (concurso preventivo) described above. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. However, the Company's Consolidated Financial Statements do not include any adjustments or reclassifications that might result from the outcome of this uncertainty.

ENARGAS Intervention

Following MetroGAS' filing for voluntary reorganization on June 17, 2010, ENARGAS issued Resolution No. I-1,260 and for the next 120 days appointed Ing. Antonio Gómez as MetroGAS's interventor. The Resolution states that the interventor will (a) supervise and control all of MetroGAS' activities that could have an impact on the public service gas supply rendered by the Company, which supply is the core of the license agreement; (b) initiate a corporate audit of MetroGAS; and (c) itemize and appraise all the Company's assets. MetroGAS is uncertain as to the effect such intervention will have over its results of operation and financial condition.

On July 14, 2010, MetroGAS lodged a direct appeal with the Court of Claims ("Cámara Nacional de Apelaciones en lo Contencioso Administrativo Federal")pursuant to Article 70 of Law 24,076 in relation with ENARGAS Resolution No. I-1,260, together with a request for an injuction to suspend the intervention effects during the process of the aforementioned direct appeal. This injunction request was rejected by a judicial resolution communicated to MetroGAS on September 8, 2010. The intervention has been extended twice, on October 22, 2010 and on February 22, 2011 by means of Resolutions No. I/1,431 and Resolutions No. I/1,612, respectively.

Suspension of Trading of the ADSs on NYSE

As a result of our filing for voluntary reorganization, our ADSs were (i) suspended from trading on the NYSE beginning on June 18, 2010 and (ii) delisted from the NYSE following the NYSE's application on Form 25 with the SEC on July 15, 2010. The last day that the Company's ADSs traded on the NYSE was June 17, 2010. The suspension of trading of our ADSs on the NYSE and their subsequent delisting have negatively impacted the levels of liquidity available to our ADS holders as they can only trade their securities (i) on the over-the-counter market in the United States or (ii) after converting them into common shares on the Buenos Aires Stock Exchange Additionally, MetroGAS can provide no assurance that it will be able to re-list its ADSs on the NYSE should the Company be successfully reorganized.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Company's significant accounting policies are as follows:

3.1. Generally accepted accounting principles

Argentine GAAP

The Company's consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Argentina ("Argentine GAAP"), and the regulations of theComisión Nacional de Valores (the Argentine National Securities Commission, or the "CNV"), assuming that the Company will continue as a going concern. However, the Company's consolidated financial statements do not include any adjustments or reclassifications that might result either from the successful outcome of the voluntary reorganization proceeding (concurso preventivo) described above or from the non-occurrence of the event. These financial statements should be read in this context.

Argentine GAAP differs in certain significant respects from generally accepted accounting principles in the United States of America ("US GAAP"). Such differences involve methods of measuring the amounts shown in the financial statements, as well as additional disclosures required by US GAAP and Regulation S-X of the Securities and Exchange Commission ("SEC"). A description of the significant differences between Argentine GAAP and US GAAP as they relate to the Company are set forth in Notes 17 to 20 to these consolidated financial statements.

Transition to IFRS

On December 29, 2009, the CNV issued Resolution No. 562, adopting Argentine Federation of Professional Councils in Economic Sciences ("FACPCE") Technical Resolution No. 26: "Professional Accounting Standards: Adoption of International Financial Reporting Standards ("IFRS") of the International Accounting Standards Board ("IASB")" beginning with fiscal year ended December 31, 2012. In summary, this resolution states that:

ŸAll entities within the public offering regime of Law No. 17,811 are required to apply IFRS, as issued by IASB, when preparing their financial statements. All other entities not covered or excluded therefrom may apply IFRS or other professional accounting standards issued by the FACPCE now or in the future.

ŸAdoption of the IFRS is effective for financial statements beginning with fiscal year ended December 31, 2012 and for interim financial statements prepared during that year. Additionally, entities required to apply IFRS must prepare a note in their annual financial statements for the fiscal year ended December 31, 2011 detailing the expected impact of IFRS on their financial results.

The transition to IFRS will require the Company to make accounting, financial and operational changes. In this respect, on April 22, 2010, the Board of Directors approved the specific implementation plan, which has progressed according to the approved plan. We are currently ending the evaluation of the IFRS implementation stage.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Principles of Consolidation

The consolidated financial statements include the accounts of MetroGAS and its subsidiary over which MetroGAS has effective control. All significant intercompany balances and transactions have been eliminated in consolidation.

In accordance with Argentine GAAP, the presentation of the parent company's individual financial statements is mandatory. Consolidated financial statements are to be included as supplementary information to the individual financial statements. For the purpose of these financial statements, the individual financial statements have been omitted since they are not required for SEC reporting purposes.

A description of the subsidiary with its respective percentage of capital stock owned is presented as follows:

Subsidiaries

Percentage of capital stock

owned as of December 31, (a)

2010

2009

2008

MetroENERGÍA S.A. (i)

95%

(a) Percentage of equity interest owned has been rounded.

(i) The Company formed MetroENERGÍA S.A. on April 20, 2005 and commenced operations on May 16, 2005.

3.2. Cash and cash equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

3.3. Use of estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make accounting estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting fiscal year. Estimates are used when accounting for the allowance for doubtful accounts, depreciation, amortization, income taxes, allowance for contingencies, impairment of long-lived assets, and present value of long term receivables and liabilities. Actual results could be significantly different from such estimates.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

3.4. Presentation of consolidated financial statements in constant Argentine Pesos

The consolidated financial statements have been prepared in constant Argentine Pesos, recognizing the overall effects of inflation through August 31, 1995. Between that date and December 31, 2001, restatement of the consolidated financial statements was discontinued due to the existence of a period of monetary stability. Between January 1, 2002 and March 1, 2003, the effects of inflation were recognized to reflect the inflation recorded during that period. As from that date, the restatement of consolidated financial statements has been discontinued.

This criterion is not in accordance with prevailing professional accounting standards, under which consolidated financial statements must be restated until September 30, 2003. This deviation from prevailing professional accounting standards does not have a significant effect on the Company's consolidated financial statements as of December 31, 2010, 2009 and 2008.

The rate used for the restatement of items was the internal wholesale price index ("IPM") published by the National Institute of Statistic and Census.

3.5. Reclassifications

Certain reclassifications of prior year information have been made to conform to the current year presentation.

3.6. Significant accounting policies

The following is a summary of significant accounting policies followed by the Company in the preparation of these consolidated financial statements.

a) Cash and banks

Cash and cash in banks were recorded at face value.

b) Foreign currency assets and liabilities

Foreign currency assets and liabilities were valued at exchange rates at year-end.

c) Short-term investments

Mutual funds and government bonds were valued at market value at year-end.

Saving accounts deposits and time deposits were valued at face value plus accrued interest at year-end.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

d) Trade receivables and accounts payable

Certain receivables and payables from the sale or purchase of goods and services, respectively, and those arising from financial transactions, are measured at their discounted value using the internal rate of return of such assets or liabilities at the time of initial measurement. This method is also called the "amortized cost" method and is equivalent to the face value of the receivables/payables plus the accrued interest less the collections/payments made at year-end. Trade receivables also include unbilled accrued services. The Company provides for losses relating to doubtful accounts based on management's evaluation of various factors.

e) Other receivables and payables

Sundry receivables and payables were valued at their nominal value incorporating, when applicable, financial results accrued at year-end, except for the amounts to be recovered through tariffs included in long term Other receivables, which were valued on the basis of the best estimation of the sums to be received discounted using the rate that reflects the time value of money and the specific risks of the receivables, Deferred income tax is shown at nominal values.

Values thus obtained incorporating financial results accrued through year-end do not significantly differ from those that would have been obtained had the present value been applied. Present value establishes that they must be valued on the basis of the best estimation of the sum to receive and to pay, respectively, discounted using a rate that reflects the value time of money and the specific risks of the transaction considered at the moment of its incorporation to the assets and liabilities, respectively.

The value of Other receivables does not exceed its respective recoverable value.

f) Inventories

Warehouse materials were valued at replacement cost at year-end. The value thus obtained, net of the allowance for inventory obsolescence, is less than the respective recoverable value estimated at year-end.

g) Fixed assets

Fixed assets received from GdE were valued at their transfer price at the time the license was granted restated for inflation as mentioned in Note 3.4. This original value was allocated among the different categories of items making up the total value based on the work of independent appraisers. Useful lives were assigned based on the remaining service life of the assets at the time of transfer according to type of asset, conservation and renewal/maintenance plans.

Subsequent additions were valued at cost, restated for inflation as mentioned in Note 3.4., less accumulated depreciation. Certain gas distribution networks built by third parties were valued based on construction cost.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

For fixed assets whose operating condition warrants replacement earlier than the end of the useful life assigned by the Company to its fixed asset category, the Company calculates the depreciation charge based on the adjusted remaining useful life assigned in accordance with the related asset replacement.

The cost of maintenance and repairs is charged to expense as incurred. The cost of significant renewals and improvements is added to the carrying amount of the respective assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the Statements of Operations.

As part of the cost of certain construction projects, the Company capitalizes certain overhead costs, related to payroll and payroll-related items clearly associated with services such as planning, execution and supervision activities of such projects.

The Company allocates overhead costs on the basis of time spent and hence benefit realized. Under this method, the Company does not capitalize as overhead costs other than payroll and payroll-related items associated with these projects. MetroGAS considers appropriate to capitalize these costs only when it can be demonstrated that the incurred cost benefited the construction project and that the allocation basis is logical and reasonable in the circumstances.

The Company capitalizes the portion of operating costs attributable to planning, execution and control of investments in fixed assets. The amounts capitalized during the years ended December 31, 2010 and 2009 amounted to Ps. 6,347 and to Ps. 4,983 respectively.

Fixed assets are depreciated by the straight-line method, using annual rates sufficient to extinguish their values by the end of their estimated useful lives.

Gas in pipelines is valued at acquisition cost restated for inflation as mentioned in Note 3.4.

The recorded value of fixed assets as a whole does not exceed its fair value at year-end.

Based on the way MetroGAS operates its entire business, the manner in which assets are used and how assets generate cash flows, the Company considers that there is only one independent identifiable cash flow generating group of assets, and therefore, the Company tested the group of assets for impairment as a whole.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

h) Income tax

As per Argentine Tax Law, the provisions for income taxes in the Statements of Operations for all periods presented were computed on a separate return basis (i.e., company by company basis). All income tax payments were made by the subsidiary. The Company records income taxes using the method required by TR No. 17. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. TR No. 17 also requires companies to record a valuation allowance for that component of net deferred tax assets which are not recoverable. The statutory income tax rate in Argentina was 35% for all periods presented.

The following tables show changes and breakdown of deferred tax assets and liabilities:

Deferred tax assets

	Estimated loss carryforward	Trade receivables	Other liabilities	Other receivables	Other	Total
Balances as of December 31, 2009	13,468	20,788	25,296	9,058	35	68,645
Movements of the year	(8,479)	2,209	3,200	12,222	12	9,164
Balances as of December 31, 2010	4,989	22,997	28,496	21,280	47	77,809

Deferred tax liabilities

	Fixed assets		Financial debt		Other		Total
Balances as of December 31, 2009	(9,327)	(17,208)		161		(26,374)
Movements of the year	(151)	17,208		3,346		20,403
Balances as of December 31, 2010	(9,478)	-		3,507		(5,971)

Deferred income tax assets generated by the tax loss carryforward recorded by the Company amount to Ps. 23,279, Ps. 13,468 and Ps. 4,989 as of December 31, 2008, 2009 and 2010, respectively, which can be offset against profits for future years, expiring in 2014.

The realization of deferred tax assets depends on the future generation of taxable profits in those years in which temporary differences become deductible. To determine the realization of assets, the Company considers the projection of future taxable profits based on its best estimation.

Net deferred assets derived from the information amount to Ps. 15,794, Ps. 42,271 and Ps. 71,838 as of December 31, 2008, 2009 and 2010, respectively.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Income tax (benefit) / expense for the years ended December 31, 2010, 2009 and 2008 differed from the amounts computed by applying the Company's statutory income tax rate to pre-tax income as a result of the following:

	December 31,
	2010	2009	2008
Income tax expense on pre-tax income	(29,583)	(24,133)	(4,110)
Permanent differences
Restatement into constant currency	14,152	13,788	13,909
Non deductible expenses and non- taxable income	2,606	(1,156)	(1,415)
Expiration of tax loss carryforward	-	23,106	-
Valuation allowance on deferred income tax assets	-	(23,279)	(6,578)
Valuation allowance on minimum presumed income tax	-	21,066	-
Total income tax (benefit) / expense	(12,825)	9,392	1,806

Below is the reconciliation between income tax (benefit) / expense and the income tax determined for fiscal purposes:

	December 31,
	2010	2009	2008
Income tax determined for fiscal purpose	25,221	1,508	17,511
Temporary differences	(38,046)	(13,009)	(9,127)
Expiration of tax loss carryforward	-	23,106	-
Valuation allowance on deferred income tax assets	-	(23,279)	(6,578)
Valuation allowance on minimum presumed income tax	-	21,066	-
Total income tax (benefit) / expense	(12,825)	9,392	1,806

The accounting standards establish that differences between the tax basis and book basis of non-monetary items for deferred income tax calculation purposes when companies prepare price-level restated financial statements shall be treated as temporary differences. However, the standard allows a one-time accommodation to continue treating the differences between the tax basis and indexed book basis of non-monetary items as permanent at the time of adoption of the standard. As such, the Company elected to continue treating differences as permanent. Had the deferred tax liability been recognized in this item, its value would amount to Ps. 249 million, Ps. 263 million and Ps. 277 million at nominal values as of December 31, 2010, 2009 and 2008, respectively. The differences of Ps. 14 million in each year, would have impacted in the results of the years 2010, 2009 and 2008, respectively.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

i) Minimum presumed income tax

The Company is subject to a tax on minimum presumed income. This tax supplements income tax. The Company calculates its minimum presumed tax by applying the effective 1% tax rate on computable assets at the end of the year. The Company's tax obligation for each period will be the higher of income tax or minimum presumed income tax. If the tax on minimum presumed income exceeds income tax, the excess amount may be computed as a prepayment of income tax through the next ten fiscal years.

The Company, based on its estimated income tax for future years, has recognized minimum presumed income tax accrued during the year and paid in previous years as a credit. That credit is shown under the heading Other non-current credits and expires between the years 2012 and 2020.

To determine the realization of such asset, the Company considers the projections of future taxable revenues based on the best estimate. Using such estimates, the Company registered an allowance for impairment of the minimum presumed income tax, which amounts to Ps. 21,066 as of December 31, 2010 and 2009.

j) Severance payments

Severance payments made to employees are expensed as incurred.

k) Balances with related parties

Balances with related parties mainly generated by operations and other services were valued based on conditions agreed between the parties.

l) Reorganization liabilities

Liabilities in local currency were valued at their nominal value incorporating, when applicable, the financial results accrued until the date of presentation of reorganization proceeding (concurso preventivo).

Liabilities in foreign currency were valued at year-end exchange rates.

These liabilities are considered long-term liabilities, given the aforementioned deadlines included in Note 2 and the fact that the reorganization process has not yet ended. Long-term liabilities also include commercial, tax, financial and social debts, among others.

Financial interests were accrued until the date of presentation of reorganization proceeding (concurso preventivo), according to Article 19 of the Bankruptcy Law. Since that date, the accrual of interests has been suspended.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

m) Contingencies provision

The Company has certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving labor and other matters. The Company accrues liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, the Company's estimates of the outcomes of these matters and the Company's lawyers' experience in contesting, litigating and settling other matters.

As the scope of the liabilities becomes better defined, there could be changes in the estimates of future costs, which could have a material effect on the Company's future results of operations and financial condition or liquidity.

n) Revenue recognition

Gas distribution revenues are recognized as gas is delivered, and include amounts for services rendered but not yet billed at the end of each year.

Volumes delivered were determined based on gas volumes purchased and other data.

o) Impairment of long-lived assets

When events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and at the end of each year, the Company evaluate the carrying value of its long-lived assets for impairment.

The carrying value of a long-lived asset is considered impaired when the expected cash flows, discounted and without interest cost, from such an asset, is less than its carrying value. In that event, a loss was recognized based on the amount by which the carrying value exceeded the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved or independent appraisals, as appropriate. In determining expected cash flows, assets are grouped at the lowest level for which cash flows are identifiable and largely independent of cash flows of other asset groups.

As discussed in Note 9.4.1 herein, after the unbundling, the Company performs its business through two separate legal entities, i.e. MetroGAS and MetroENERGÍA. MetroGAS distributes and transports natural gas and also sells natural gas to certain customers, primarily residential customers. Due to regulatory constraints, MetroGAS was precluded from selling natural gas to certain large customers.

Accordingly, MetroGAS formed MetroENERGÍA to continue selling gas to these customers. However, the transportation and distribution of gas to these specific customers served by MetroENERGÍA is performed by either MetroGAS (if these customers are within the service area of MetroGAS) or other distributor, as applicable. Therefore, MetroGAS and MetroENERGÍA use the same group of assets to perform their businesses.

Based on the way MetroGAS operates its entire business, the manner in which assets are used and how assets generate cash flows, the Company considers that has only one independent identifiable cash flow generating group of assets, and therefore, it tested the group of assets for impairment as a whole.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

Fair market value is determined primarily using projected cash flows discounted at a rate commensurate with the risk involved. If alternative courses of action are expected, different cash flow scenarios are estimated using a probability-weighted approach, which considers the likelihood of each possible outcome.

As of December 31, 2010, we identified impairment indicators and performed an impairment test on our property, plant and equipment in accordance with Argentine GAAP. Pursuant to such test, we compared the net carrying amounts of our long-lived assets to the estimated discounted future cash flows expected to be generated by such assets, estimated using a probability-weighted approach. As the discounted cash flows were higher than the carrying amount of fixed assets, we determined that the assets were not impaired.

3.7. Loss per share and per ADS

Loss per share and per ADS were calculated based on the weighted average number of outstanding shares during the years ended December 31, 2010, 2009 and 2008. Each ADS represents ten Class "B" shares.

3.8. Information by segment

The Company mainly operates in providing gas distribution services and, through MetroENERGÍA, in buying and selling natural gas and/or its transportation on its own, on behalf of or associated to third parties.

Details regarding certain information classified by segment of business, in accordance with the guidelines of Technical Resolution No. 18 of the FACPCE are as follows:

	December 31,
	2010
	MetroGAS	MetroENERGÍA	Eliminations	Total
	Distribution	Trading
Sales	903,368	233,272	(14,312)	1,122,328
Operating income	3,074	52,178	1,220	56,472
Equity in income of subsidiary	26,129	-	(26,129)	-
(Loss) income before tax	(101,629)	48,876	(31,769)	(84,522)
Income tax	29,932	(17,107)	-	12,825
Net (loss) income	(71,697)	31,769	(31,769)	(71,697)
Total assets	2,451,150	91,002	(31,252)	2,510,900
Total liabilities	1,625,246	58,922	(776)	1,683,392
Increase in fixed assets	119,111	-	-	119,111
Depreciation of fixed assets	74,421	-	-	74,421
Investment in subsidiary	25,540	-	(25,540)	-

Other significant items in Statement of Cash Flow generating cash movements
Allowance for disposal of fixed assets	8,581	-	-	8,581
Contingencies provision	9,464	-	-	9,464
Allowance for doubtful accounts	5,921	1,052	-	6,973
Exchange loss on financial operations	35,380	-	-	35,380
Result on present-valuing long term financial debt	48,003	-	-	48,003
Materials consumed	34,293	-	-	34,293

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

	December 31,
	2009
	MetroGAS	MetroENERGÍA	Eliminations	Total
	Distribution	Trading
Sales	878,852	200,243	(4,868)	1,074,227
Operating income	35,935	47,428	10,723	94,086
Equity in income of subsidiary	31,582	-	(31,582)	-
(Loss) income before tax	(83,293)	40,950	(26,607)	(68,950)
Income tax	4,951	(14,343)	-	(9,392)
Net (loss) income	(78,342)	26,607	(26,607)	(78,342)
Total assets	2,181,254	74,021	(29,540)	2,225,735
Total liabilities	1,283,653	47,103	(3,968)	1,326,788
Increase in fixed assets	105,756	-	-	105,756
Depreciation of fixed assets	71,331	-	-	71,331
Investment in subsidiary	26,018	-	(26,018)	-

Other significant items in Statement of Cash Flow generating cash movements
Allowance for disposal of fixed assets	7,439	-	-	7,439
Contingency provision	10,445	-	-	10,445
Allowance for doubtful accounts	5,618	2,556	-	8,174
Exchange differences on financial operations	87,610	-	-	87,610
Result on present-valuing long term financial debt	18,524	-	-	18,524
Materials consumed	8,009	-	-	8,009

Sales operations from MetroGAS to MetroENERGÍA were valued according to tariffs applied by MetroGAS to its commercial operations with third parties under the legislation in force.

There is a Professional Service Agreement between MetroGAS and MetroENERGÍA for the provision of administrative, accounting, tax, financial, legal and all other services related to the normal development of MetroENERGÍA's operations. This agreement was valued under regular market conditions for this type of service.

NOTE 3 - BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (Contd.)

3.9. Financial instruments with off-balance sheet risk and concentration of credit risk

As of December 31, 2010, 2009 and 2008, MetroGAS does not have any financial instruments to manage its exposure to fluctuations in foreign currency exchange or interest rates and, accordingly, has not entered into transactions that create off-balance sheet risks associated with such financial instruments.

The Company does not use financial derivative instruments for speculative purposes.

The Company provides credit in the normal course of business to a broad range of commercial and industrial users, government entities, residential customers and six electric power generating companies (the "Electric Power Generating Companies").

Trade receivables are mainly comprised of balances with residential and small volume general service commercial clients. The only significant concentrations of credit are those with the Electric Power Generating Companies.

Trade receivables from the Electric Power Generating Companies are as follows:

	December 31,
	2010	2009
Electric Power Generating Companies	25,718	129,206

The approximate percentages of net sales derived to Electric Power Generating Companies for the years ended December 31, 2010, 2009 and 2008 were 7.9%, 8.2% and 12.8% respectively.

NOTE 4 - INITIAL DETERMINATION OF THE VALUE OF NET ASSETS

The transfer price of the net assets contributed to the Company was determined based on the price of US$ 362,021 thousand paid for 70% of the outstanding capital stock. The value of the remaining 30% of the shares was also determined on this basis. The initial amounts due to the Federal Treasury and YPF S.A. ("YPF") (US$ 110,000 thousand), assumed by the Company under the Transfer Agreement, was added to the total net assets so calculated (US$ 517,173 thousand), in determining the aggregate original value of fixed assets. Such value converted at the exchange rate in effect as of the Transfer Agreement, has been restated for inflation as mentioned in Note 3.4.

The transfer price of these assets was approved by Resolution No. 1,409 of the Argentine Economy Ministry ("EM") and was converted at the exchange rate in effect on the Transfer Date.

NOTE 5 - BREAKDOWN OF THE MAIN ACCOUNTS

Details regarding the significant amounts included in the accompanying consolidated financial statements are as follows:

	December 31,
	2010	2009
Assets
Current assets
a) Cash and banks
Cash	938	350
Banks	45,824	60,510
Collections to be deposited	2,797	2,702
	49,559	63,562

b) Investments
Savings account deposits	63	53
Mutual funds	105,541	58,500
Government securities	2		21
Time deposits	156,183	6,149
	261,789	64,723
c) Trade receivables, net
Trade accounts receivable	146,360	144,127
Unbilled revenues	31,829	16,616
Receivables from sales on behalf of third parties	47,363	24,717
Tax on banking transactions to be recovered	6,004	4,591
Related parties (Note 7)	442	389
PURE (i)	(2,797)	(4,607)
Allowance for doubtful accounts (Note 21 d))	(21,896)	(17,378)
	207,305	168,455
(i) Corresponds to liabilities related to PURE Program. PURE is a government-established program aimed at reducing energy consumption. Consumers are encouraged to use less energy by receiving benefits and/or penalties on their monthly bills according to their level of energy consumption. Additional charges included in invoices are collected by the Company and deposited in a trust on behalf of ENARGAS.
d) Other receivables, net
Other advances	6,827	4,564
Insurance and other prepaid expenses	3,671	4,564
Tax receivables	1,422	4,323
Other receivables	1,399	923
	13,319	14,374
e) Inventories, net
Warehouse materials	6,343	5,669
Allowance for inventory obsolescence (Note 21 d))	(1,751)	(1,835)
	4,592	3,834

NOTE 5 - BREAKDOWN OF THE MAIN ACCOUNTS (Contd.)

	December 31,
	2010	2009
Non-current assets
f) Investments
Mutual funds	668	371
	668	371
g) Other receivables
Net deferred income tax (Note 3.6.h)	71,838	42,271
Receivables for minimum presumed income tax (Note 3.6.i)	80,848	66,296
	152,686	108,567
Study, revision and inspection of works in public space levy to be recovered GCBA (Note 9.4.5)	60,407	49,990
Occupancy of public space levy to be recovered (Note 9.4.5)	83,168	74,063
Others	16	281
Present Value Discount	(45,486)	(10,915)
	250,791	221,986
h) Fixed assets, net
Original value	2,915,493	2,814,164
Accumulated depreciation	(1,192,616)	(1,125,734)
	1,722,877	1,688,430

NOTE 5 - BREAKDOWN OF THE MAIN ACCOUNTS (Contd.)

Detail of fixed assets for the last two years is as follows:

		December 31, 2010			December 31, 2009
Categories	ANNUAL RATE OF DEPRECIATION MAX - MIN	COST	ACCUMULATED DEPRECIATION	NET BOOK VALUE	COST	ACCUMULATED DEPRECIATION	NET BOOK VALUE
Land	-	17,501	-	17,501	17,501	-	17,501
Building and civil constructions	2.00%	76,156	25,708	50,448	75,602	24,290	51,312
High pressure mains	2.22% to 10%	294,312	185,460	108,852	277,302	175,176	102,126
Medium and low pressure mains	1.19% to 10%	1,720,532	540,795	1,179,737	1,641,676	507,240	1,134,436
Pressure regulating stations	4% to 12.5%	65,253	37,942	27,311	63,973	35,847	28,126
Consumption measurement installations	2.85% to 5%	345,670	150,778	194,892	342,041	139,416	202,625
Other technical installations	6.67%	50,735	43,893	6,842	49,814	41,384	8,430
Machinery, equipment and tools	6.67% to 20%	28,311	26,004	2,307	27,583	25,589	1,994
Computer and telecommunications equipment	5% to 50%	169,348	154,437	14,911	158,978	150,489	8,489
Vehicles	10% to 20%	10,986	8,378	2,608	10,393	8,258	2,135
Furniture and fixtures	10% to 20%	5,466	5,453	13	5,461	5,444	17
Materials	-	9,848	-	9,848	8,277	-	8,277
Gas in pipelines	-	214	-	214	214	-	214
Work in progress	-	69,795	-	69,795	84,915	-	84,915
Advances to fixed assets suppliers	-	445	-	445	370	-	370
Distribution network extensions constructed by third parties	1.82% to 2.38%	66,261	14,430	51,831	63,372	13,128	50,244
Offsetting item for distribution network extensions constructed by third parties	2% to 2.38%	(5,969)	(662)	(5,307)	(5,329)	(527)	(4,802)
Allowance for obsolescence of materials (Note 21 d))	-	(615)	-	(615)	(529)	-	(529)
Allowance for disposal of fixed assets (Note 21 d))	-	(8,756)	-	(8,756)	(7,450)	-	(7,450)
		2,915,493	1,192,616	1,722,877	2,814,164	1,125,734	1,688,430

NOTE 5 - BREAKDOWN OF THE MAIN ACCOUNTS (Contd.)

	December 31,
	2010	2009

Liabilities
Current liabilities
i) Accounts payable
Gas and transportation	107,857	69,594
Other purchases and services	85,949	74,159
Related parties (Note 7))	37,594	15,962
Payables from sales on behalf of third parties	8,997	24,229
Transportation Trust Fund (i)	67,427	54,106
	307,824	238,050

(i) Collected amounts related to Transportation Trust Fund which are pending deposit in the abovementioned trust.

j) Financial debt (Note 10)
Negotiable bonds (face value) (Note 21 a))	-	81,774
Interest and other expenses payable to foreign financial institutions (Note 21 a))	-	972
Overdraft with financial institutions	-	31
	-	82,777

k) Taxes payable
Value added tax	6,796	11,328
Occupancy of public space levy	89	7,974
GCBA study, revision and inspection of works in public space levy	4,889	13,217
CNG tax	3,464	5,209
Income tax	18,332	12,823
Gross revenue tax	2,325	313
Other taxes	1,804	5,355
	37,699	56,219

Non-current liabilities
l) Financial debt (Note 10)
Negotiable bonds (face value) (Note 21 a))	-	887,022
Negotiable bonds (fair value discount)	-	(49,165)
	-	837,857

m) Reorganization liabilities (Note 2)
Accounts payable	109,373	-
Financial debt (Note 10 and 21 a))	1,034,556	-
Payroll and social security payable	3,534	-
Taxes payable	45,461	-
Related companies (Note 7)	27,380	-
Other liabilities	27	-
	1,220,331	-

Statement of Operations	December 31,
	2010	2009	2008
n) Sales
MetroGAS' gas sales	604,269	603,968	507,483
MetroENERGíA's sales on own behalf	221,184	184,354	115,634
MetroGAS' transportation and distribution services	189,857	177,740	187,176
MetroGAS' other sales	46,145	43,475	46,655
MetroGAS' processed natural gas sales	48,785	48,801	36,910
MetroENERGíA's selling commission	12,088	15,889	7,706
	1,122,328	1,074,227	901,564

NOTE 6 - DUE DATES OF INVESTMENTS, RECEIVABLES AND PAYABLES

The due dates of investments, receivables and payables are as follows:

	December 31,
	2010	2009
6.1. Investments
- Becoming due
less than 3 months	156,183	6,149
- Without due date	106,274	58,945
Total	262,457	65,094

6.2. Receivables
- Past due
less than 3 months	10,931	37,197
from 3 to 6 months	9,591	14,514
from 6 to 9 months	24,249	22,743
from 9 to 12 months	1,297	1,577
from 1 to 2 years	14,023	6,914
more than 2 years	7,478	8,027
Sub-total	67,569	90,972
- Without due date	2,998	639

- Becoming due
less than 3 months	163,753	100,849
from 3 to 6 months	3,976	4,313
from 6 to 9 months	2,380	1,975
from 9 to 12 months	1,844	1,459
from 1 to 2 years	20,058	91,453
more than 2 years	230,733	130,533
Sub-total	422,744	330,582
Allowance for doubtful accounts	(21,896)	(17,378)
Total	471,415	404,815

6.3. Payables
- Past due
less than 3 months	68,935	44,931
from 3 to 6 months	1,793	228
from 6 to 9 months	72	-
from 9 to 12 months	-	34
from 1 to 2 years	-	1,140
more than 2 years	-	74
Sub-total	70,800	46,407
- Without due date (*)	1,228,218	6,998

- Becoming due
less than 3 months	287,383	252,131
from 3 to 6 months	5,507	47,606
from 6 to 9 months	-	2,845
from 9 to 12 months	12,386	52,191
from 1 to 2 years	-	130,944
more than 2 years	-	716,890
Sub-total	305,276	1,202,607
Total	1,604,294	1,256,012

(*) As of December 31, 2010, Reorganization liabilities are included for an amount of Ps. 1,220,331 thousand.

NOTE 6 - DUE DATES OF INVESTMENTS, RECEIVABLES AND PAYABLES (Contd.)

As of December 31, 2010 and 2009 investments include (i) "BODEN" bearing interest at an annual rate of 2.00 and 4.00% as of December 31, 2010 and 2009 respectively, (ii) time deposits at an annual average rate in Dollars of 0.19% and 0.25% as of December 31, 2010 and 2009, and at an annual average rate in Pesos of 11.13% and 9.75% as of December 31, 2010 and 2009, respectively and (iii) mutual funds at an average annual yield of 4.6% and 5.7% as of December 31, 2010 and 2009, respectively.

Pursuant to the terms of the license, in the case of invoices for services not paid when due, the Company is entitled to collect interest on overdue amounts at a rate equivalent to 150% of the 30-day interest rate in local currency, charged by Banco de la Nación Argentina, from the due date through the date of payment. As these are overdue receivables, and following standards of prudence, the Company recognizes this income at the time of actual collection.

Payables do not accrue interest, except for the financial debt, which is detailed in Note 10 and taxes payable in relation to the payment facilitation plans which accrued interest until the date of the filing for voluntary reorganization (concurso preventivo, Note 2 to the primary financial statements), according to Article 19 of the Bankruptcy Law. From that date forward, the accrual of interest should be suspended.

NOTE 7 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES

Gas Argentino, as owner of 70% of the Company's common stock, is the controlling shareholder of MetroGAS.

MetroGAS carries out certain transactions with certain affiliates of the shareholders of Gas Argentino. As of December 31, 2010, the shareholders of Gas Argentino are BG Inversiones Argentinas S.A. ("BG") (54.67%) and YPF Inversora Energética S.A. ("YPF") (45.33%).

These consolidated financial statements include the following transactions with related parties:

Gas supply, sales and services contracts with companies directly and indirectly related to YPF.

Management fees accrued pursuant to the Technical Assistance Agreement with BG International Limited.

Fees accrued under the terms of a Personnel Supply Agreement with BG Argentina S.A (2008 and 2009) and YPF (2008, 2009 and 2010).

During the years ended December 31, 2010, 2009 and 2008, MetroGAS entered into certain transactions with Astra Evangelista S.A., as mentioned below, who is indirectly related to YPF.

NOTE 7 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Contd.)

Under the Law No. 24,076 (the "Gas Act" and Decree No. 1,738/92, shareholders of Gas Argentino, who are gas producers and, as mentioned above, have a controlling interest in the Company, are prohibited from supplying (either directly or indirectly through other producers or resellers) more than an aggregate of 20% of the gas purchased by the Company in any given month. In addition, MetroGAS is prohibited from giving any of Gas Argentino's shareholders preferential treatment. Company's management intends to manage the Company's gas supply so as not to violate any of these prohibitions. During 2010, 2009 and 2008, aggregate gas purchases from shareholders of Gas Argentino did not exceed the above-referenced 20% limit.

Significant transactions with related parties are as follows:

	December 31,
	2010	2009	2008

Gas sales	1,101	1,351	1,267
Commissions for sales on behalf of third parties	617	1,556	1,376
Gas purchases	98,766	102,065	82,414
Fees for professional services	780	2,300	2,070
Technical operator's fees	-	-	9,029
Other income, net	107	-	87

NOTE 7 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Contd.)

The outstanding balances as of December 31, 2010 and 2009 from transactions with related parties are as follows:

December 31,

2010 2009

Trade Accounts Reorganization Trade Accounts

receivablespayableliabilityreceivablespayable

Current Current Non Current Current Current

Thousands of Ps.

Controlling company:

Gas Argentino S.A. - - - - -

Significant influence:

YPF Inversora Energética S.A. - - - - -

Other related parties:

BG Argentina S.A. - - - - -

BG International Limited - - - - -

YPF S.A. 226 37,594 27,380 162 15,962

Operadora de Estaciones de Servicios S.A. 216 - - 222 -

Astra Evangelista S.A. - - - 5 -

Board of directors and management: - - - - -

442 37,594 27,380 389 15,962

NOTE 8 - RESTRICTED ASSETS

A substantial portion of the assets transferred to MetroGAS by GdE has been defined in the license as "Essential Assets" for the performance of the licensed service. The Company is obligated to segregate and maintain them, together with any future improvements, in accordance with certain standards defined in the license.

The Company must not, for any reason, dispose of, encumber, lease, sublease or loan Essential Assets for purposes other than providing licensed service without prior authorization from ENARGAS. Any extensions and improvements that the Company may make to the gas distribution system after the Takeover Date may only be encumbered to collateralize loans maturing after a period of one year and used to finance new extensions of and improvements to the distribution network.

Upon expiration of the license, the Company will be obligated to transfer to the National Government, or its designee, the Essential Assets listed in the updated inventory as of the expiration date, free of any debt, encumbrance or attachment.

As a general rule, upon expiration of the license, the Company will be entitled to collect the lesser of the following two amounts:

a) The value of the Company's property, plant and equipment determined on the basis of the price paid by Gas Argentino, and the original cost of subsequent investments carried in US Dollars and adjusted by the Producer Price Index ("PPI"), net of the accumulated depreciation.

b) The proceeds of a new competitive bidding, net of costs and taxes paid by the successful bidder (Note 9.1.).

As indicated in Note 2, the above mentioned provisions have been and/or may be modified. It is not possible to assess the impact of any such modifications.

NOTE 9 - REGULATORY FRAMEWORK

The natural gas distribution system is regulated by Law No. 24,076 (the "Gas Act"), which, together with Decree No. 1,738/92, other regulatory decrees, the specific bidding rules ("Pliego"), the Transfer Agreement and the license establishes the Regulatory Framework for the Company's business.

The license, the Transfer Agreement and regulations promulgated pursuant to the Gas Act contain requirements regarding quality of service, capital expenditures, restrictions on transfer and encumbrance of assets, restrictions on cross ownership among gas production, transportation and distribution companies and restrictions on transfers of common stock of MetroGAS.

The Gas Act and the license establish ENARGAS as the regulatory entity to administer and enforce the Gas Act and applicable regulations. ENARGAS' jurisdiction extends to transportation, marketing, storage and distribution of natural gas. Its mandate, as stated in the Gas Act, includes the protection of consumers, the fostering of competition in the supply of and demand for gas, and the encouragement of long-term investment in the gas industry.

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

During the present fiscal year and based on the Consumer Protection Act, Chamber K of the Civil Court made MetroGAS responsible for an irregularity in an internal installation without taking into account either the regulatory framework in force or the precedent case law relevant to this matter. The Company applied for an extraordinary appeal before the National Supreme Court in addition to giving ENARGAS due notice.

Tariffs for gas distribution services were established in the license and are regulated by ENARGAS.

As indicated in Note 2, the above mentioned provisions have been and/or may be modified. It is not possible to assess the impact of any such modifications.

9.1. Distribution license

Upon expiration of the original 35-year term, MetroGAS may apply to ENARGAS for a renewal of the license for an additional ten-year term. ENARGAS is required at that time to evaluate the Company's performance and make a recommendation to the Government. MetroGAS would be entitled to such ten-year extension of its license unless ENARGAS can prove that MetroGAS is not in substantial compliance with all its obligations stated in the Gas Act and its regulations and in the license.

At the end of the 35-year or 45-year term, as the case may be, the Gas Act requires that a new competitive bidding be held for the license, in which MetroGAS would have the option, if it has complied with its obligations, to match the best bid offered to the Government by any third party.

As a general rule, upon termination of the license, MetroGAS will be entitled to receive the lower of the value of specified assets of MetroGAS or the proceeds paid by the successful bidder in a new competitive bidding process (Note 8).

MetroGAS has various obligations under the Gas Act, including the obligation to comply with all reasonable requests for service within its service area. A request for service is not considered reasonable if it would be uneconomic for a distribution company to undertake the requested extension of service. MetroGAS also has the obligation to operate and maintain its facilities in a safe manner. Such obligation may require certain investments for the replacement or improvement of facilities as set forth in the license.

The license details further obligations of MetroGAS, which include the obligation to provide distribution service, to maintain continuous service, to operate the system in a prudent manner, to maintain the distribution network, to carry out mandatory investment program, to keep certain accounting records and to provide periodic reports to ENARGAS.

The license may be revoked by the Argentine Government upon the recommendation of ENARGAS under the following circumstances:

Serious and repeated failure by the Company to meet its obligations.

Total or partial interruption of not interruptible service for reasons attributable to the Company of duration in excess of the periods stipulated in the license within a calendar year.

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

Sale, assignment or transfer of the Company's essential assets or encumbrances thereon without ENARGAS' prior authorization, unless such encumbrances serve to finance extensions and improvements to the gas pipeline system.

Bankruptcy, dissolution or liquidation of the Company. The reorganization proceeding does not affect the normal course of the operations of the Company or, consequently, the Company's license.

Ceasing and abandoning the provision of the licensed service, attempting to assign or unilaterally transfer the license in full or in part (without ENARGAS' prior authorization) or giving up the license, other than as permitted therein.

Transfer of the technical assistance agreement mentioned above or delegation of the functions granted in that agreement without ENARGAS' prior authorization.

The license stipulates that the Company cannot assume the debts of Gas Argentino or grant loans to encumber assets, to secure debt of, or grant any other benefit to creditors of, Gas Argentino.

9.2. US PPI semi-annual adjustment

ENARGAS through Resolution No. 1,477 adjusted MetroGAS' tariffs as from January 1, 2000 without including adjustments to reflect changes in the US PPI, which would have resulted in a 3.78% increase in the transportation and distribution components of the tariffs as of that date. This was due to the fact that in negotiations with ENARGAS and the Government, the distribution and transportation companies agreed to defer the collection of the amounts related to the US PPI adjustment corresponding to the year 2000. Moreover, ENARGAS established, through the same resolution, the methodology to recover the accrued revenues corresponding to the application of the US PPI adjustment to the first semester of 2000 during the ten months beginning July 1, 2000.

On July 17, 2000, the gas distribution and transportation companies, ENARGAS and the Government agreed to pass through to the tariffs, as from July 1, 2000: a) the US PPI adjustment deferred for the first six months of 2000; and b) an increase in the tariffs to reflect the US PPI increase (3.78%). Additionally, they agreed to defer the billing of the amounts related to the US PPI adjustments corresponding to the period from July 1, 2000 through September 30, 2002. The deferred amounts were guaranteed by the Government and therefore the corresponding accrued revenues would have been recovered through the tariffs as from July 1, 2002 to June 30, 2004.

On August 4, 2000, Decree No. 669/00 was issued by the Government, confirming the terms of this agreement.

With reference to proceedings brought by the Ombudsman, on August 29, 2000 MetroGAS was notified of a court order, suspending Decree No. 669/00, referring mainly to the unconstitutionality of the tariff adjustment according to a mechanism of indexation based on a foreign index within the applicability of the Convertibility Law. Accordingly, ENARGAS informed the Company that the tariffs should be reduced to exclude the US PPI adjustment. MetroGAS, as well as most gas distribution and transportation companies, appealed this ruling and the corresponding ENARGAS resolution.

Additionally, ENARGAS and the Government also appealed the court order. On October 5, 2001, the Chamber of Appeals rejected this appeal. The Government and several gas companies have appealed the decision before the Supreme Court of Justice of Argentina. It is not possible to predict when the Court will rule on this matter.

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

The resolution of the main issue of the debate is still pending. Notice has been served upon the various licensees to participate in that matter.

As a result of the measures adopted as mentioned in Note 2, the National Government issued the Emergency Law, which, among other provisions, and specifically as regards contracts for public works and services, made clauses providing for adjustments in Dollars or other foreign currency ineffective, as well as indexation clauses based on the price indexes of other countries and any other indexation mechanisms, in addition to fixing a one peso to one dollar rate for tariffs and ordering renegotiation of utility contracts, passing US PPI on to tariffs, as rightfully claimed by the Company, becomes impracticable. Both a transfer to the tariffs of the US PPI as well as the possibility of recovery through the National Government, which endorsed the related credits, are contingent on future events that are beyond the Company's control.

In view of the above mentioned scenario, the net effect of income accrued during 2001 and 2000 in connection with the deferral of US PPI adjustments has been reversed in its financial statements as of December 31, 2001 in the "Extraordinary Loss" item.

The reversal should not be understood as a waiver of rights arising out of the Regulatory Framework that governs the Company's activities or as an abandonment of any of the actions filed by the Company so far.

On February 1, 2002, ENARGAS, according to the Emergency Law, approved tariffs without including the US PPI adjustment. Consequently, MetroGAS has filed an administrative action, claiming the PPI adjustment for the years 2000 and 2001, which resolution as of the date of issuance of these financial statements is pending.

9.3. License and tariff renegotiation

On February 12, 2002, the Government issued Decree No. 293/02, which entrusted the EM with the renegotiation of public utility licenses and created a Committee for the Renegotiation of Contracts for Public Works and Services ("CRC").

On July 3, 2003, by means of Decree No. 311/03, UNIREN was created, aiming at giving advice during the renegotiation process of public works and services contracts and developing a regulatory framework common to all public services. UNIREN continues the renegotiation process developed by the previous CRC.

Although MetroGAS strictly complied with the submission of all information required, and the very reports made by CRC and UNIREN stated that the gas sector posed no difficulties as to the execution of license contracts and the compliance of conditions and obligations committed, and although licensees, among them MetroGAS, complied with the necessary conditions to continue with the process of renegotiation, there was an exchange of proposals between the parties and the National Government but the process is still delayed and no agreement has been reached.

The Emergency Law, which was originally scheduled to expire in December 2003, was extended up to December 31, 2011. The renegotiation terms for licenses and concessionsof utility services were also extended.

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

Although several draft proposals have been exchanged with UNIREN during the last years, the Company has not been able to reach a definitive agreement because, among other reasons, the Government requires that the Company's direct and indirect shareholders suspend and eventually release any domestic or international claim against the Government as a consequence of the emergency condition and that the Company grant indemnity to the Government regarding any measure, decision or ruling relating to economic compensation or a claim for damages or indemnity based on or related to measures implemented due to the emergency situation established by Law 25,561 and/or the cancellation of the PPI with regard to the license agreement. Among the relevant issues lacking a consensus for signing of a letter of understanding we can mention, the amount of tariffs increases and the lack of certainty regarding an effective collection of these increases by the Company within an appropriate term considering the situation the Company is undergoing. Without ruling out other alternatives, and taking into account the delicate situation the Company is in, it is still negotiating an agreement contemplating tariff increases which allows it to make a proposal to its creditors and end the legal proceedings it is involved in, thus restoring business feasibility. According to the Company's legal advisors, a letter of understanding similar in content to the one sent by UNIREN has to be authorized by the judge in charge of the judicial proceeding.

On October 1, 2008, MetroGAS signed a Transition Agreement with UNIREN, which was ratified by the Shareholder's Meeting on October 14, 2008 and approved by the Executive Power on March 26, 2009 by Decree No. 234, which was published on April 14, 2009. This Transition Agreement establishes a Transitional Tariff Regime as from September 1, 2008, which includes an increase in distribution and transportation tariffs. All amounts MetroGAS receives from customers as a result of the tariff increases established under the Transition Agreement are obligated to be deposited into a trust fund, which funds are to be applied by the Company to future investments in gas infrastructure projects, with the prior approval of ENARGAS, in the licensee area.

The Transition Agreement establishes general guidelines for final tariff increases on invoices, including adjustments of gas prices at well head and adjustments of transportation and distribution gas tariffs. It is complemented by ENARGAS Resolution No. I/409, which creates categories of residential customers according to their annual consumption, and Resolution No. 1,070/08 from the ES, which approved an agreement signed with gas producers through which gas prices at well head are established as from September 2008 until December 2009 for each customer category according their annual consumption.

The Transition Agreement stipulates that residential customers with consumption up to 800 CM/year will have no increase in tariffs (62% of the customers and 25% of volumes of MetroGAS' residential customers). Tariff increases will be applied to charges per unit of consumption and reserve capacity charge but will not be applied neither to fixed charges nor minimum charges. The increase will be higher for higher level of consumption, and daily differences accumulated for gas purchases of previous periods will be eliminated. Likewise, the rates and charges that the Company is authorized to charge are adjusted by 25%.

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

On December 16, 2009, UNIREN sent MetroGAS a letter that sought to enhance the understanding by all parties to the terms of the license renegotiation. While this December 2009 letter moved the dialogue forward, no consensus has been reached between the National Government, the Company, and the Company's shareholders to date.

Although ENARGAS has not yet issued the respective tariff charts in accordance with the Transition Agreement, on June 2010, the Company sent to ENARGAS and UNIREN investment records from September 2008 to December 2009 and the Investment Plan 2010, in accordance with the Transition Agreement.

With regard to the trust fund dedicated to the construction of infrastructure works, during 2010, MetroGAS complied with all the necessary steps to form an administrative trust fund with Nación Fideicomisos S.A., and on March 22, 2010, the letter of understanding, signed by both parties, was sent to ENARGAS and the MPFIPS.

During 2010, several notices were sent to ENARGAS, UNIREN, and MPFIPS highlighting the difficulties MetroGAS has experienced in maintaining its solvency and the urgent necessity of signing the Renegotiation Agreement.

In face of the difficult financial situation affecting MetroGAS and the lack of response from state bodies regarding the proceedings started, as noted above, on June 8, 2010 the Company filed a legal protection proceeding against the ENARGAS and the Sub-secretary of Coordination and Management Control due to their delay in implementing the "Temporary Tariff Scheme" (RTT) established in the Transition Agreement signed on October 1, 2008 and approved by the National Executive Power through Executive Order No. 234/09 . The Company stated that both ENARGAS and the Sub-secretary of Coordination, within the scope of their respective responsibilities, have had since March 2009 to implement the tariff scheme derived from the Temporary Tariff Scheme. The delay resulted in prejudice of the Company's constitutional rights. Therefore, the Company requested that the defendants carry out, without delay, the necessary actions to put into force the aforementioned tariff increase.

On November 30, 2010 the Judge rejected the legal protection proceeding, which decision which was then appealed by the Company on December 7, 2010.

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

As of the date of issuance of these financial statements, the Company has neither invoiced nor registered the effects of the mentioned Transition Agreement.

It is important to point out that tariffs for distribution services have not been increased since 1999, which has caused imbalances between MetroGAS' income and expenses. If the issuance of the tariff charts continues to be delayed, the economic and financial condition of the Company will continue to deteriorate.

Given the adverse condition of the Company as a result of the delay in the approval of tariff increases, on June 17, 2010, the Board of Directors filed for a reorganization proceeding (as described in Note 2).

On that same date, through Resolution No. I-1260 issued on June 17,2010, ENARGAS notified MetroGAS that the Company would be under the supervision of Ing. Antonio Gomez, an ENARGAS-appointed Supervisor ("Interventor") for a term of 120 days.

The aforementioned Resolution states that the Interventor will supervise and control all MetroGAS's activities that could have an impact on the public service gas supply rendered by Metrogas, which is the core of the license agreement. In addition, the Resolution also ordered a corporate audit of MetroGAS and to individualize and assess the value of all MetroGAS' assets transferred by the PEN through Decree No. 2,459/92 and those added at a later date.

On July 14, 2010, MetroGAS lodged a direct appeal with the Court of Claims ("Cámara Nacional de Apelaciones en lo Contencioso Administrativo Federal")pursuant to Article 70 of Law 24,076 in relation with ENARGAS Resolution No. I-1260, together with a request for an injuction to suspend the intervention effects during the process of the mentioned direct appeal. This injunction request was rejected by a judicial resolution communicated to MetroGAS on September 8, 2010.

On October 18, 2010, MetroGAS was notified of ENARGAS Resolution No. I-1431, by which the ENARGAS Interventor, Ing. Antonio Luis Pronsato, decided to extend the company's intervention for 120 calendar days and appoint Ing. Antonio Gómez as interventor. On February 14, 2011, MetroGAS was notified of Resolution ENARGAS No. 1,612, which resolved to extend the intervention for 120 calendar days more.

9.4. Changes in Regulation

9.4.1 Unbundling of natural gas

In mid-February 2004, the Executive Power issued two Executive Orders which provisions have influence on the Company's operating activities and its economic and financial performance. Executive Order No. 180/04 established an investment scheme for basic gas infrastructure works and created an Electronic Gas Market ("EGM") to coordinate transactions associated to gas purchase at the Spot market and to secondary gas transportation and distribution markets. Executive Order No. 181/04 enabled the energy authorities to enter into agreements with gas producers to determine an adjustment in the price of gas purchased by gas distributors and the implementation of applicable mechanisms to users who purchase their own gas directly as distributors would

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

no longer be able to supply them. Furthermore, the Order divided "residential" customers in three categories according to consumption.

Subsequently, a set of resolutions and provisions were issued to regulate the above-mentioned executive orders. The main provisions refer to: i) suspension of the export of surpluses of natural gas useful for internal supply, ii) development of a Rationalization Program for the Export of Natural Gas and Use of Transportation Capacity, iii) ratification of the Agreement for the Implementation of the Schedule for theNormalization of Gas Prices at Points of Entry into the Transportation System, through which the Company has restructured all of its natural gas purchase contracts, iv) prices for reduced consumption below defined thresholds and the application of additional charges to certain customers that exceed them, established by the Natural Gas Rational Use Program ("PUREGAS"), suspended from September to April of each year, v) creation and constitution of a Trust System through a Trust Fund, vi) approval of a useful cut-off mechanism to ensure supply to non interruptible customers

and vii) approval of the Implementation Agreement of the Electronic Gas Market between the Buenos Aires Stock Exchange and the Energy Secretariat ("ES") through which EGM started functioning.

On December 22, 2005, the ES passed Resolution No. 2,020/05. Such resolution established a schedule to start purchasing natural gas in a direct way for General Service "P" customers and CNG stations. This process was called "gas unbundling".

The schedule stipulated that: a) users with consumption (during the period April 2003- March 2004) equal or over 30,000 CM/month and up to 150,000 CM/month had to purchase gas in a direct way as from January 1st 2006, b) users with consumption (during the same period) equal or over 15,000 CM/month and under 30,000 CM/month had to purchase gas in a direct way as from March 1, 2006, c) users with consumption (during the same period) over 9,000 CM/ month and under 15,000 CM / month do not have a specified date yet for the purchase of gas in a direct way and d) as regards CNG stations, they had to purchase gas in a direct way as from March 1, 2006 (extended until April 1, 2006 through Resolution No. 275/06).

Moreover, such Resolution excluded non-profit civil associations, labor unions, trade associations or mutual benefit associations, health institutions and private or public educational institutions from the spectrum of customers that as from the stated dates have to acquire natural gas directly from producers and/or marketers.

Additionally, Resolution No. 2,020/05 established a set of restrictions for representing CNG stations in the purchase of natural gas, in order to limit possible vertical associations among people from the gas industry and stipulated a Mechanism for Assigning Natural Gas to CNG stations, through which, CNG stations get natural gas by means of an offer and demand system within the EGM.

In this context, the process of conforming MetroENERGÍA as a natural gas trading company was finished during 2005, entity created with the aim of keeping the biggest number of customers as possible and count on a proper tool inaccordance with the new scenario where the Company has to perform.

Dated February 28, 2006, the ES issued Resolution No. 275/06, which modifies ES Resolution No. 2,020/05. These modifications are related to: (i) the extension, up to April 1, 2006, for CNG stations to purchase gas in a direct way, (ii) the limitation, up to April 30, 2007, of the effective date of CNG bargain and sale contracts to

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

be signed as from April 1, 2006, (iii) the obligation, of the gas distribution companies to represent CNG stations in regards to their natural gas purchases, but only during the first time that the procedure established for CNG purchase in the EGM is realized. However, this last obligation of gas distribution companies has been extended to any purchase made under such procedure.

On March 14, 2006 the National Government signed an agreement with natural gas producers and CNG stations to freeze prices for CNG was in force until December 31, 2007.

The auction procedures established for CNG stations to acquire natural gas directly from gas producers, with the volumes of gas established by the EGM, are carried out periodically. The most recent auction took place in October 2010.

On September 22, 2006, the ES issued Resolution No. 1,329/06, by which the following aspects of the industry were regulated: (i) specifies the different concepts that conform natural gas global volumes that producers commit to inject into the transportation system, (ii) sets a priority regime regarding nominations and natural gas nominations' confirmation to be complied with by producers and transportation companies, contemplating a penalty for non-fulfillment of their duties, (iii) categorizes as uninterruptible the "initial minimum reserve" of CNG stations operating in February 2004, (iv) incorporates a mechanism through which natural gas distribution companies will have to register unbalanced volumes resulting from the consumption of CNG stations that are below the distribution companies' nominations; being those unbalanced volumes then invoiced by the corresponding producers to the distribution companies at CNG price, or else compensated between them in the sphere of bargain and sale agreements that they may have in force, and (v) enables natural gas distribution companies to use specific natural gas volumes included in natural gas bargain and sale agreements that users enter into in a direct way with producers, under certain conditions.

With regard to CNG stations, ENARGAS Resolution No. 1,174/10 extended until April, 30, 2011 the effects of ENARGAS Resolution No. 3,569/06, by which the Regulator ordered distribution companies to ensure those stations with interruptible service contracts a minimum daily volume of 5000 m3 so as to guarantee CNG supply to customers (thus increasing by 2000 m3 the volume originally established through ENARGAS Resolution No. 3,515/06).

9.4.2 Complementary Agreement with Natural Gas Producers

On October 1, 2008, the ES published Resolution No. 1,070/08, approving the "Complementary Agreement with Natural Gas Producers" which was executed on September 19, 2008. This Agreement is aimed at restructuring gas prices at well head, segmenting natural gas residential demand, and establishing the natural gas producers' contribution to the trust fund created by Law No. 26,020 to finance the sale of LPG cylinders for residential use at various prices.

In accordance with the Complementary Agreement with Natural Gas Producers, ENARGAS Resolution No. I/409/08, published on September 19, 2008, divided the "R" category of residential customers into 8 subcategories according to their annual natural gas consumption. Based on this subdivision, an increase on the value of natural gas at the point of entry into the transportation system was stipulated; however, such increase is not to apply to the first three residential subcategories and sub-distributors.

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

As a result of the Complementary Agreement with Natural Gas Producers, increases in the price of natural gas have to be fairly allocated to the different components of the user's final tariff so as to guarantee that the distributors' equation will remain unaltered after these increases. ENARGAS further implemented this Agreement through Resolution No. I/446/08 by which it approved a new tariff scheme, reflecting the above-mentioned tariff increases, for customers applicable from September 1, 2008, except for CNG, for which the

new tariffs were to be applied from October 1, 2008. However, the new tariff charts do not provide for the readjustment of the distribution services tariffs.

Additionally, on December 23, 2008, the ES published Resolution No. 1,417/08 by which it implemented the Complementary Agreement with Natural Gas Producers. Through this Resolution, the ES fixed new natural gas prices at the point of entry into the transportation system. As a result of these price changes, ENARGAS published Resolution No. I/566/08 on the same day as ES Resolution No. 1,417/08, thereby approving the new tariff scheme to be applied and adjusting such scheme to reflect the new increased prices for natural gas.

On October 4, 2010, ENARGAS Resolution No. 1,410/10 was published in the Official Gazzette, which approved new dispatch rules named "Procedure for Gas Applications, Confirmations and Control" governing inter alia natural gas injection by producers and natural gas nominations by distributors. Since October 1, 2010, when such Procedure entered into force, MetroGAS has nominated daily the total volume of natural gas needed in accordance with the Procedure to supply its non-interruptible demand.

9.4.3 Total Energy Plans and Gas Plus

The National Government implemented the Total Energy Plan in 2007 and kept it in force during 2008 and 2009; said plan is aimed at guaranteeing the supply of energy resources (liquid and gas fuels), and at encouraging the replacement of natural gas and/or electrical energy consumption for the use of alternative fuels. As a matter of fact, Resolution No. 459/07 by the MPFIPS created the above mentioned Total Energy Plan which was then ruled by different resolutions that enlarged and extended its enforcement.

The total Energy Plan includes a propane-air provision plan under the responsibility of ENARSA. In connection to this last matter, ENARGAS Resolution No. I/831/09 was published on August 20, 2009 by means of which new specifications were set for synthetic natural gas to be injected into the system of distribution. At present a plant injecting gas (propane-air) into MetroGAS' distribution system is operating. The said plant is operated by ENARSA. MetroGAS is responsible for controlling that all quality measures which are required by the ENARGAS to ensure a safe operation, are met at all times.

Through ES Resolution No. 24/08, modified by Resolution ES No. 1,031/08 and Resolution ES No. 695/09, the government launched in 2008 a program called "Gas Plus" to encourage production of natural gas in virtue of which every new gas volume produced under the said program shall not be considered part of the volumes included in the 2007-2011 Agreement nor it shall be under its price conditions, however, it can not be exported and its price has to cover associated costs and generate a reasonable profitability.

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

9.4.4 Trust Funds

With regards to the so called "specific charges" for the financing of natural gas transportation system expansion projects that natural gas distribution companies charge their industrial customers and thermoelectric generators (and CNG stations, but only in the case of the specific charges I) on behalf of, and to the order of, Nación Fideicomisos S.A, according to the provisions that created and ruled them (among others, Law No. 26,095, Executive Orders No. 180/04 and No. 1,216/06, MPFIPS Resolutions No. 185/04, No. 2008/06, No. 409/07, No. 161/08 and 2,289/10, ENARGAS Resolution No. 3,689/07 and ENARGAS Notes No. 6,398 /07, No. 4,381/07, No. 808/07, No. 1,989/05, No. 3,937/05 and No.14,924), there are cases in which MetroGAS' customers who, being compelled to pay such charges, have resorted to justice in order to (i) determine whether such charges are unconstitutional and (ii) ask for the implementation of precautionary measures until a final decision is issued. In some cases, courts have effectively granted the requested precautionary measures, compelling MetroGAS not to invoice or collect such charges and MetroGAS has been complying with these measures. However, there have been cases where such precautionary measures have been overturned at subsequent judicial proceedings. After some discussions between the ENARGAS and Nación Fideicomisos S.A., mid June 2009, Nación Fideicomisos S.A. authorized to MetroGAS to offer payment plans to customers for specific charges.

Moreover, Executive Order No. 2,067/08, published on December 3, 2008, called for the creation of aFondo Fiduciario para Atender a las Importaciones de Gas(Trust Fund for Gas Imports). Established for the importation of natural gas, this trust fund complements the domestic gas production in order to decrease the number of "cut days" and thus guarantee the supply of natural gas to the domestic market.

MPFIPS Resolution No. 1,451/08, published on December 23, 2008, implemented the aforementioned Executive Order. ENARGAS Resolution No. I/563/08, published on December 23, 2008, established tariff charges (effective November 1, 2008) for residential customers who annually consume over 1,000 m3. Such charges will finance the trust fund.

On June 4, 2009, ENARGAS Resolution No. 768 created an exception to the Resolution No. 2,067/08 charges between May 1 and August 31, 2009 for MetroGAS' residential customers (categories R3 1o. y R3 2o.), who annually consume between 1,001 and 1,500 m3. On August 18, 2009, ENARGAS Resolution No. 828/08 extended this exemption through October 1st, 2009. Moreover, said Resolution created a 100% subsidy for consumption between June and July of 2009, and a 70 % subsidy for consumption between August and September of 2009. These subsidies applied to customers paying the Resolution No. 768 charges.

Provisions mentioned in paragraphs above were implemented again in the winter of 2010 by Resolution ENARGAS No. 1,179/10.

On August 19, 2009, ENARGAS issued Note No. 9,097, requesting that MetroGAS highlight in its invoices the amount of the subsidy effectuated by Resolution No. 828 and then, incorporate diagonally and with special typography the following legend: "Consumption subsidized by the National Government". This Note also

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

asked MetroGAS (i) to approximate how much it would cost if the same services were provided in Brazil, Uruguay and Chile, and (ii) to estimate the consumption of the volume invoiced by means of bottled gas of

liquified fuel gas. This provision was implemented again in the winter of 2010 by Note ENARGAS No. 4,862/10.

Finally, ENARGAS issued Note No. 11,821 following "Defensor del Pueblo de la Nación - Inc. Med. C/Estado Nacional - Decreto No. 2,067/08 - Resolución No. 1,451/08 y Otro S/Proceso de Conocimiento", Case No. 6,530/09, a decision by the National Court of Appeals. Accordingly, the Decree 2,067/08 regime remains valid and applicable. Affected consumers, however, may continue to pay a charge to cancel their invoices, excluding the 2,067/08 charge plus the corresponding VAT (which are considered advance payments). Should the applicability of the 2,067/08 charge be confirmed, MetroGAS could claim its 2,067/08 charge. This judicial resolution does not apply to users domiciled in municipalities of Avellaneda and Quilmes's jurisdictions. These users are obligated to pay the aforementioned charge, but are protected by the judicial measures requested and obtained by Ombudsmen's municipalities, which prevent MetroGAS from invoicing the specific charge resulting from Decree No. 2,067/08. Additionally, at least one judicial verdict pronounced in first instance has declared the unconstitutionality of the aforementioned Decree in a case brought by a user in our distribution area, in which MetroGAS is prevented from invoicing the mentioned charge.

9.4.5 Municipal Rates

The regulatory framework in force contemplates the reallocation of tariffs for all new taxes, levies or rate increases, applicable since the beginning of the operations on December 29, 1992, and, under certain conditions, the use of public space levy for the laying of natural gas pipelines. Notwithstanding this framework, and without regard to the many requests presented by MetroGAS, as of the date of these financial statements, ENARGAS has not authorized any reallocation of tariffs for levy payments made by MetroGAS to different municipalities, not only from the province of Buenos Aires but also from the Autonomous City of Buenos Aires, regarding these concepts.

As there was no approval with regard to the reallocation of tariffs of the Study, Revision and Inspection of Works in Public Spaces Levy of the GCABA and of the Occupation of Public Space Levy not only of the GCABA but also of the Municipalities of the Province of Buenos Aires, MetroGAS during 2009 and 2010, filed legal protection proceedings concerning default payments against both the Sub-secretary of Coordination and Management Control, who must answer in accordance with the terms of MPFIPS Resolution No. 2,000/05, and against ENARGAS with regard to the Study, Revision and Inspection of Works in Public Spaces Levy and the Occupation of Public Spaces Levy of the GCABA and of the Occupation of Public Spaces Levy of the Municipalities of the Province of Buenos Aires. The Company is still filing the legal protection proceedings before the different courts.

Regarding these cases, MetroGAS believes that its license authorizes the Company to occupy public property without charge for the purpose of rendering its licensed service and, if a charge is levied by a provincial or municipal authority, the Company is allowed to add a surcharge to the relevant tariffs to recover its added costs. In turn, MetroGAS has recorded a credit in an amount totaling Ps. 143.6 million and Ps. 124.0 million of the Study, Revision and Inspection of Works in Public Spaces Levy and the Occupation of Public Spaces Levy of the GCABA and of the Occupation of Public Spaces Levy of the Municipalities of the Province of Buenos

NOTE 9 - REGULATORY FRAMEWORK (Contd.)

Aires, to cover these surcharges (and other related surcharges based on levies issued by other municipalities) under the "Other non-current receivables" line item of its balance sheet at December 31, 2010 and 2009, respectively. (See Note 5.g above).

The Company's actions are supported by "Gas Natural BAN c/ Municipalidad de Campana y Litoral Gas c/ Municipalidad de Villa Constitución s/ Acción meramente declarativa", a ruling of the Argentine Supreme Court of Justice. The ruling states that point 9.6.2 of Executive Decree No. 2,255/92 stipulated that cost variations caused by changes in tax regulations must be added to tariffs in accordance with Article 41 of Law No. 24,076.

Pursuant to these legal precedents, laws and resolutions, MetroGAS considers that these credits are recoverable.

NOTE 10 - FINANCIAL DEBT

The following table sets forth the conditions of the Company's financial debt as of December 31, 2010 and 2009:

	December 31,
	2010			2009
	Ps. Book Value	Interest Rate	Maturity	Ps. Book Value	Interest Rate	Maturity
Negotiable Bonds (1)
Series B	-	-	-	1,653	7.375%	09/27/2002
Interest payable	-	-	-	972	-	-
Overdraft	-	-	-	31	12%	-


Negotiable Bonds (2)
Series 1	838,321	8% (8)	12/31/2014 (8)	801,213	8% (3)	12/31/2014 (6)
Series 2 Class A	24,869	5% (8)	12/31/2014 (8)	23,768	5% (4)	12/31/2014 (7)
Series 2 Class B	137,459	3.8% (8)	12/31/2014 (8)	142,162	3.8% (5)	12/31/2014 (7)
Interest Payable	33.907	-	-	-	-	-
Present value discount	-			(49,165)
Total financial debt	1,034,556			920,634

Corresponds to the Global Program for issuing unsecured non-convertible Negotiable Bonds, which was approved by shareholders at their Extraordinary Shareholders' Meeting held on December 22, 1998.

Corresponds to the Global Program mentioned in (1) above, which was extended for 5 years by shareholders at their Extraordinary Shareholders' Meeting held on October 15, 2004 and subsequently extended for another 5 years by shareholders at their Extraordinary Shareholders' Meeting held on February 24, 2010.

Interest rates for this series are 8% for the years 2006-2010 and 9% subsequently.

Interest rates for this series are 3% for the year 2006, 4 % for the years 2007-2008, 5% for the years 2009-2010, 7% for the years 2011-2012 and 8% subsequently.

Interest rates for this series are 1.8% for the year 2006, 2.8% for the years 2007-2008, 3.8% for the years 2009-2010, 5.8% for the years 2011-2012 and 6.8% for the years 2013-2014.

The amortization schedule for the principal amount of this series is the following: 5% on June 30 and December 31, 2010, 10% each subsequent June 30, and December 31 until December 31, 2012 and 12.5% each subsequent June 30 and December 31 until December 31, 2014.

The amortization schedule for the principal amount of this series is the following: 16-2/3% on June 30 and December 31, 2012, 16-2/3% each subsequent June 30 and December 31 until December 31, 2014.
Financial interest was accrued until the date of presentation of reorganization proceeding (concurso preventivo), according to Article 19 of the Bankruptcy Law. Since that date, the accrual of interests has been suspended.

The Company has not capitalized any interest as of December 31, 2010, 2009 and 2008.

NOTE 10 - FINANCIAL DEBT (Contd.)

On March 25, 2002, MetroGAS announced the suspension of principal and interest payments on all of its financial indebtedness due to the fact that the Emergency Law, together with implementing regulations, altered fundamental parameters of the Company's license, including the suspension of the tariff adjustment formula and the restatement of the tariff into Pesos, and also the announcement of the devaluation of the peso.

On November 9, 2005, the Company announced the commencement of a solicitation of consents to restructure its unsecured financial indebtedness pursuant to an APE under Argentine law.

On May 12, 2006, the Company concluded the financial debt restructuring process, performing the effective exchange of the bonds. Consequently, it issued Series 1 Notes amounting to US$ 236,285.6 thousand in principal amount, Series 2 Notes Class A amounting to US$ 6,254.8 thousand in principal amount and Series 2 Notes Class B amounting to Euros 26,070.5 thousand in principal amount. Additionally the Company made payments amounting to US$ 105,608.4 thousand, for cash options received along with US$ 19,090.5 thousand and Euros 469.3 thousand to pay accrued interest on Series 1 notes and Series 2 notes through December 30, 2005.

The restructuring of the financial debt generated a gain of Ps. 388,748 which, net of the income tax effect represented a gain net of Ps. 252,686 mainly generated by a reduction in the principal amount of the existing debt as some bondholders elected the cash option, as well as the reduction in accrued interests net from costs related to the transaction.

MetroGAS, and its subsidiary, must comply with a series of restrictions under the Company's new debt obligations, which, among others, include the following:

Mandatory redemption with excess cash ("Excess Cash Redemption"): the company will apply an amount of excess cash (not allocated for Restricted Payments) (i) to redeem (ratably among the holders of the Series 1 Notes) any Outstanding Series 1 Notes through note prepayments and (ii) after all Outstanding Series 1 Notes have been paid in full, to redeem (ratably among the holders of the Series 2 Notes) any Outstanding Series 2 Notes through note prepayments, in each case to the extent the Company not used such amount of net available excess cash to make market purchase transactions.

Limitations on indebtedness: the Company will not be able to incur in additional indebtedness, except in certain specific instances, and not to exceed US$ 20 million.

Limitations on investments: until the Company had redeemed, repaid or purchased at least US$ 75 million principal amount of the Series 1 Notes, MetroGAS will make no Investments other than Permitted Investments. Furthermore, deductible capital expenditures, for the excess cash computation, will not excess US$ 15 million by each computation year.

Limitations on restricted payments: until the Company had redeemed, repaid or purchased at least US$ 75 million principal amount of the Series 1 Notes, restricted payments (including dividends) will be subject to the Company's indebtedness ratio.

Limitations on the sale of assets: the Company will not make any asset sale unless the following conditions are met: a) the asset sale is at the fair market value, b) at least 75% of the value under consideration is in the form of cash or Cash Equivalents and, c) such asset sale does not materially and adversely affect the Company's ability to meet these obligations.

NOTE 10 - FINANCIAL DEBT (Contd.)

Limitation on transactions with controlling company, controlled company or under common control.

Pursuant to the excess cash provision described in the first bullet, the Company calculated the respective amount for the period beginning on October 1, 2008 and ending on March 31, 2009 and for the period beginning on April 1, and ending on September 30, 2009, from which no excess cash was computed as a result. Moreover, all of the previously mentioned restrictions have been complied with by the Company, including the payment obligations under the actual global program of Negotiable Bonds.

During 2006 and 2007, the Company carried out market purchases amounting to a total principal amount of the Series 1 Notes of US$ 25.4 million.

The adverse financial conditions that the Company faces as a result of this continued delay in its tariff increases led its Board of Directors to approve the Company's filing of a petition for voluntary reorganization (concurso preventivo) in an Argentine court on June 17, 2010 (see Note 2 for further details on this proceeding). This reorganization filing generated an event of default under its outstanding debt obligations. Pursuant to the terms of its outstanding debt obligations, this default resulted in the automatic acceleration of the Company's outstanding debt obligations. Nevertheless, upon the reorganization filing, an automatic stay was put into place on the payment of principal and interest on the Company's outstanding debt obligations.

The financial debt are considered to be long-term liabilities, given the aforementioned deadlines included in Note 2 and the fact that the reorganization process has not yet ended.

NOTE 11 - COMMON STOCK

As of December 31, 2010, the Company's common stock totaled Ps. 569,171, all of which is fully subscribed, paid-in and registered.

Class of Shares		Ps.
Ordinary certified shares of Ps. 1 par value and 1 vote each:
Class "A"		290,277
Class "B"		221,977
Class "C"		56,917
Total		569,171

The shareholders at the Extraordinary Shareholders' Meeting held on March 12, 1997 approved the most recent capital increase resulting in total common stock of Ps. 569,171. This increase was authorized by the CNV on April 8, 1997 and by the Buenos Aires Stock Exchange on April 10, 1997 and was registered with the Public Registry of Commerce on June 17, 1997 under No. 6,244, Corporations Book 121, Volume A.

Gas Argentino owns 70% of the Company's common stock, 20% of the Company's common stock was distributed in an initial public offering as specified below and 10% of the Company's common stock is hold by the PPP (Note 14).

NOTE 11 - COMMON STOCK (Contd.)

In accordance with the Transfer Agreement, the Government sold through an initial public offering the 20% of the Company's common stock it held, represented by 102,506,059 Class "B" Shares. At the date of these financial statements this common stock is held by private investors.

On November 2, 1994, the CNV, pursuant to Resolution No. 10,706, authorized to public offering all the Company's outstanding shares at such date. The Class "B" Shares offered in the United States are represented by American Depositary Shares ("ADSs") and were registered with the SEC. The Class "B" Shares and the ADSs were approved for listing on the BCBA and the New York Stock Exchange ("NYSE"), respectively. On June 17, 2010, we received a notice from the NYSE that MetroGAS' ADSs had been suspended from trading on the NYSE as a result of our filing for voluntary reorganization.

NOTE 12 - RESTRICTIONS ON THE DISTRIBUTION OF PROFITS

The Company is required to keep in effect the authorization to offer the Company's common stock to the public and the authorization for the shares to be listed on the Argentine Republic's authorized securities markets for a minimum period of fifteen years as of the respective dates on which such authorizations were granted.

Any voluntary decrease, redemption or distribution of the Company's shareholders' equity, except for payments of dividends, will require prior authorization by ENARGAS.

In accordance with the Argentine Corporations Law, the Company's by-laws and Resolution No. 434/03 of the CNV, 5% of the Company's net income for the year plus (less) prior year adjustments must be transferred to the Company's legal reserve, until it reaches 20% of the subscribed capital including the adjustments to common stock.

Cash dividend distributions will depend on the Company's indebtedness ratio until the Company has redeemed, repaid or purchased at least US$ 75 million principal amount of the Series 1 Notes.

NOTE 13 - LIMITATION ON THE TRANSFERABILITY OF GAS ARGENTINO SHARES

The Pliego stipulates that Gas Argentino, as controlling shareholder of MetroGAS, may sell part of its shares in the Company, provided it retains 51% of MetroGAS' equity.

In addition, the Company's by-laws provide that ENARGAS' approval must be obtained prior to the transfer of the Class "A" shares (representing 51% of common stock). The Pliego states that such prior approval will be granted three years after the Takeover Date provided that:

The sale covers 51% of MetroGAS' common stock or, if the proposed transaction is not a sale, it will result in the acquisition of at least 51% of MetroGAS' equity by another company,

The applicant provides evidence that the transaction will not affect the operating quality of the licensed service, and

The existing technical operator, or a new technical operator approved by ENARGAS, retains at least 15% of the new owner's shares and the technical assistance contract remains in force.

NOTE 13 - LIMITATION ON THE TRANSFERABILITY OF GAS ARGENTINO SHARES (contd.)

Sales of Gas Argentino shares in excess of 49% require authorization by the ENARGAS.

Dated December 7, 2005, Gas Argentino entered into an agreement to restructure its financial debt with all of its creditors, funds administered by Ashmore ("Ashmore Funds") and by Marathon ("Marathon Funds"), by means of which Gas Argentino will cancel all of its liabilities related to such debt in exchange for issuing and/or transferring, by the current shareholders of Gas Argentino, Common Stock of the said company representing 30% of its Common Stock post-issuing to Ashmore Funds and transferring 3.65% and 15.35% of MetroGAS' Common Stock, owned by Gas Argentino, to Ashmore Funds and Marathon Funds, respectively. Such agreement was, among other conditions, subject to the approval of ENARGAS and of the Secretariat of Interior Commerce with prior agreement of the National Antitrust Committee (Comisión Nacional para la Defensa de la Competencia - "CNDC"). Through Resolution No 1/097, dated September 14, 2007, ENARGAS approved the transference of the remaining shares, pending approval from the CNDC and the Secretariat of Interior Commerce.

On May 15, 2008, Gas Argentino received a letter from Marathon Funds stating their willingness to terminate the financial debt restructuring agreement signed by Gas Argentino on December 7, 2005 with all its creditors. Marathon exercised the power as set forth in said agreement, which stated that any holder of the Gas Argentino's financial indebtedness would be able to terminate the agreement if corresponding approvals were not obtained.

On May 11, 2009, Gas Argentino was notified of a bankruptcy proceeding filed by an alleged Gas Argentino creditor. Consequently, on May 19, 2009, Gas Argentino's Board of Directors decided to file a voluntary bankruptcy proceeding (concurso preventivo) in a local Argentine court pursuant to Bankruptcy Law No. 24,522. On June 8, 2009, the National Court decided to open the reorganization proceedings, ordering the suspension of trials for equity reasons against Gas Argentino. As of the date of these financial statements, the proof of claim period (verificaciones de crédito) has ended. The court-appointed supervisor (thesíndico concursal) has submitted its report to the court regarding each individual claim. On February 10, 2010, the Argentine court issued its decision on whether each individual claim was either accepted or rejected.

On August 9, 2010, the Court extended by Resolution the original term for Gas Argentino, rescheduling all the deadlines to the ones established by the Court in MetroGAS'concurso preventivo proceedings. The exclusivity period the period during which the Company may submit a proposal to each creditor individual was extended to March 9, 2012, the informative hearing was extended to March 2, 2012 and the due date to publish the proposal was extended to February 10, 2012.

Appeals against the aforementioned extension were presented by the creditors who claimed credits based on Negotiable Obligations as well as thesíndico concursal. The appeals were accepted by a resolution issued on August 19, 2010. After the remedies were justified and the offenses answered to by the Company, the file was submitted to the Court of Appeals on October 4, 2010, who approved the extension.

NOTE 14 - EMPLOYEE STOCK OWNERSHIP PLAN ("PPP")

At the inception of the Company, the owner of Class C shares was the National Government. However, Decree No. 1,189/92 of the National Government, which provided for the creation of the Company, established that 10% of the common stock represented by Class "C" shares was to be included in the PPP, as required under Chapter III of Law No. 23,696. The transfer of the Class "C" Shares was approved on February 16, 1994 by Decree No. 265/94. The Class "C" shares are held by a trustee for the benefit of GdE employees transferred to MetroGAS who remained employed by MetroGAS on July 31, 1993 and who elected to participate in the PPP.

In addition, the Company's by-laws provide for the issuance of profit sharing bonuses as defined in Article 230 of Law No. 19,550 in favor of all regular employees so as to distribute 0.5% of the net income of each year among the beneficiaries of this program. Amounts are accrued provided retained earnings exist.

Participants in the PPP must purchase their shares from the National Government for Ps. 1.10 per share, either by paying cash or by applying dividends on such shares and 50% of their profit sharing bonus to the purchase price. The trustee retains custody of the Class "C" shares until they are fully paid by employees.

Once the Class "C" shares are fully paid, they may be converted at the request of the holders thereof into freely transferable Class "B" shares. The decision to convert Class "C" Shares to Class "B" Shares must be taken by the Class "C" shareholders, acting as a single class. While the PPP is in effect, neither the by-laws of the Company nor the proportions of the various shareholdings may be changed until the requirements set forth in the PPP are fully complied with.

On March 6, 2008, the Board of Directors of MetroGAS approved the conversion of Class "C" shares into Class "B" shares, as requested by the PPP Executive Committee on March 3, 2008.

On May 21, 2008, MetroGAS received a letter from the CNV notifying it that the share conversion was subject to receipt of a resolution from the National Government approving the full payment of the Class "C" shares. Such full payment was approved on August 22, 2008 pursuant to National Government Resolution No. 252.

On December 30, 2008, the PPP Executive Committee requested MetroGAS to suspend the conversion procedure presented before the CNV and the BCBA until further notice.

NOTE 15 - LONG-TERM CONTRACTS

In order to assure itself of sufficient gas supply and transportation capacity to enable it to provide the licensed service, since the beginning of the concession, MetroGAS has entered into long-term contracts for the purchase of gas and gas transportation services. In order to obtain access to technical expertise required providing its licensed service, MetroGAS entered into the long-term Technical Assistance Agreement referred to below.

15.1. Gas supply

The Company operates with the following suppliers: Repsol YPF, Total Austral, Wintershall Energía, Pan American Energy, Petrobras, Apache and other producers in the Provinces of Tierra del Fuego, Neuquén and Santa Cruz, Argentina.

The agreements between the natural gas suppliers and the Company, provided for in Resolution No. 208/04, expired on December 31, 2006. However, these agreements were extended until April 30, 2007 and subsequently until July 2007 as the natural gas suppliers were allotted more time to reply to the National Government's proposed agreement with them.

On June 14, 2007, Resolution No. 599/07 of the Energy Secretariat was published in the Official Gazette, approving the draft Agreement with Gas Producers 2007 2011 (the "Agreement 2007-2011"). It was subsequently ratified by the gas producers and came into effect on August 1, 2007. The Agreement 2007-2011 governs and regulates the supply of natural gas by gas producers to gas distribution companies (who in turn distribute gas to residential users, small businesses, industries, CNG refueling stations and power plants) for the years ended December 31, 2008 through 2011. The Agreement 2007-2011 sets forth regulations depending on the type of consumer and indicates the volumes, basins and point of entry to the transportation system to be observed by each gas producer. As a result of factors not attributable to the Company (e.g., lack of compliance of certain producers, lack of transportation capacity, increased demand for natural gas, etc.), the volumes made available to the Company under the Agreement 2007-2011 do not cover the demand for natural gas from the Company's non-interruptible customers.

Although the Agreement 2007-2011 foresees the execution of ancillary gas supply agreements ("GSAs") between gas distribution companies and natural gas suppliers, the Company has not yet entered into any GSAs because the terms and conditions offered by the natural gas suppliers have not been acceptable to it. In fact, the Company believes their offers are in breach of their obligations under the Agreement 2007-2011.

On September 19, 2008 the ES subscribed with natural gas producers the "Complementary Agreement with Natural Gas Producers" (Resolution No. 1,070) aimed at restructuring gas prices at well head and segmenting the residential demand for natural gas, complementary to the Agreement approved by Resolution No. 599/07. The said Agreement was in force as from September 1, 2008, except for CNG, which was applied as from October 1, 2008.

Finally, on December 16, 2008 the ES issued Resolution No. 1,417/08 fixing new basin prices to be applied as from November 1, 2008.

NOTE 15 - LONG-TERM CONTRACTS (Contd.)

Due to the Company's understanding that the volumes, basins and points of entry to transportation set forth in the Agreement 2007-2011 would prevent it from fully supplying its non-interruptible demand, it made reports to ENARGAS, the Energy Secretariat and the Fuel Sub-secretariat to raise awareness of this situation and to request its remediation.

On October 4, 2010, ENARGAS Resolution No. 1,410/10 was published in the Official Gazzete, which approved new dispatch rules named "Procedure for Gas Applications, Confirmations and Control" governinginter alianatural gas injection by producers and natural gas nominations by distributors. The aim of this supplemental regulation is to determine the minimum consumption levels of large users, in order to manage natural gas dispatch and curtailments during periods of shortages of natural gas. Among its rules, the Procedure establishes that natural gas distributors are free to determine the volumes of gas they require for their non-interruptible demand (comprising basically of residential and small commercial users) to be supplied by the producers, regardless of the estimated volumes committed by producers under the Agreement 2007-2011. Since October 1, 2010, when such Procedure entered into force, MetroGAS has nominated daily the total volume of natural gas needed to supply its uninterruptible demand.

The gas supply contracts also entitle MetroGAS to certain reductions of its take-or-pay amounts in the event that demand from power plants in the Company's service area falls below certain volumes of gas per day or in the event of any direct purchase of gas from a supplier or intermediaries and of transportation services for the purchased gas (which bypasses MetroGAS network). The Company considers it unlikely that its take-or-pay commitments for gas supplies will lead to significant liabilities as of December 31, 2010.

15.2. Gas transportation

MetroGAS has entered into a number of transportation contracts, with expiration dates ranging between 2008 and 2021, with Transportadora de Gas del Sur S.A. ("TGS"), Transportadora de Gas del Norte S.A. ("TGN") and other companies, which provide for firm transportation capacity of 24.6 MMCM per day, considering contracts in force as of December 31, 2010.

The estimated annual valuation of firm transportation under these contracts is, as follows:

Years	Annual contract amounts (Million of Ps.)
2011	190.04
2012	184.41
2013	184.41
2014	69.62
2015	12.22
2016/21	7.14

These contracts could be affected by Emergency Law provisions applicable to utility services contracts, which relate to natural gas transportation. As of the date of the issuance of these financial statements, the potential impact of such effects is not possible to assess.

15.3 Transportation and distribution commitments

NOTE 16 - FISCAL AND LEGAL MATTERS

The contracts entered into with power plants include clauses to cede transportation during the winter period; these clauses allow MetroGAS to restrict the transportation and distribution service for certain volume to supply its non-interruptible demand.

In case MetroGAS is obligated to restrict the transportation and distribution service for a higher volume than the established in each contract, mainly due to a higher firm demand, those contracts establish penalties to pay to power plants due to these restrictions.

16.1. Turnover tax (Province of Buenos Aires)

During 1994, the Province of Buenos Aires agreed with the Argentine Government that the Province would not impose gross revenue taxes on sales of natural gas at a rate in excess of 3.5% of the invoice prices of those sales. However, the Province imposed gross revenue taxes on sales of natural gas at a higher rate and instructed the Company to include gross revenue taxes at the higher rate in invoices to its customers and to remit the taxes so collected to the Province. MetroGAS declined to follow those instructions, citing the agreement between the Province and the Argentine Government described above.

On December 22, 2005, through Resolution No. 907/05, the Revenue Department of the Province of Buenos Aires requested the payment of amounts corresponding to the period from 2001 to 2003, that would have been received from customers, if the mentioned rate increase had been applied in the invoices (approximately Ps. 10 million, including interests and fines). Such Resolution was appealed on January 16, 2006, before the Fiscal Court of the Province of Buenos Aires.

On September 27, 2006 theComisión Federal de Impuestos (Federal Tax Commission) through judgment No. 112/06 ratified the criterion followed by the Company and rejected a motion of revision filed by the Province of Buenos Aires within a file that analyzes a situation identical to MetroGAS'. Against such judgment, the Province of Buenos Aires filed an extraordinary motion of revision against the same Federal Tax Commission to be decided by the Federal Supreme Court of Justice. Said extraordinary motion was granted and is pending of definitive decision by the Federal Supreme Court of Justice.

On March 3, 2008, through Resolutions No. 95/08, No. 96/08 and No. 97/08, the Revenue Department of the Province of Buenos Aires requested the payment of amounts corresponding to the period from January 2004 to October 2005 of the above mentioned rate increase, and for difference in the income and expenses rate. Those amounts approximately Ps. 27 million, including interests and fines. On March 27, 2008, those resolutions were appealed before the Tax Court of the Province of Buenos Aires.

In the event that MetroGAS is finally compelled to pay for such amounts, it will request a reallocation of such rate increase to the tariffs paid by customers in compliance with the terms of the license.

As of December 31, 2010, the Company maintained an allowance of Ps. 16.7 million to cover the contingency related to the difference in the determination of the income and expenses rate.

NOTE 16 - FISCAL AND LEGAL MATTERS (Contd.)

16.2. Rates and charges

Through Resolution No. 2,778/03, ENARGAS stated that MetroGAS had collected excessive rates and charges from its customers amounting to Ps. 3.8 million and stipulated a fine for Ps. 0.5 million. The Company duly filed an appeal for reconsideration with a subsidy appeal against the mentioned Resolution and against the interest rate applied on the fine. As of December 31, 2010 the total amount demanded by ENARGAS amounted to Ps. 22.3 million, including interests and fines, which has been recorded as a provision.

16.3. Government of the City of Buenos Aires - Works on public roadways.

On January 25, 2008, pursuant to Law No. 2,634 and Regulation Decree No. 238/08 published on March 28, 2008, the City of Buenos Aires created and now regulates a new regime for the construction and maintenance of public roadways. The regime specifies charges to pay for works in public spaces and establishes that closing works must be made by the GCBA. Since November 1, 2009, the GCBA once again modified the procedure to repair sidewalks and stated that those companies which made holes in sidewalks have to repair them.

The GCBA's Control of Special Misdemeanors Agency sanctioned MetroGAS for several reasons. The Company is contesting these administrative infractions and has sought a judicial determination that the law is unconstitutional and the fines are unreasonable. As of December 31, 2010, the Company has registered an allowance of Ps. 2.4 million related to these charges.

16.4. Interpretation disagreements with the regulatory authority.

As of the date of issuance of these financial statements, there are several disagreements between the Company and the pertinent regulatory authorities as to the interpretation of various legal issues. As of December 31, 2010, the Company has recorded an allowance of Ps. 9.2 million related to these disagreements.

NOTE 17 - RECONCILIATION OF SHAREHOLDERS' EQUITY AND NET INCOME TO US GAAP

The accompanying consolidated financial statements have been prepared in accordance with Argentine GAAP, which differ in certain respects from US GAAP. Such differences involve methods of measuring of the amounts shown in the financial statements as well as additional disclosures required by US GAAP and Regulation S-X of the SEC.

The principal differences between Argentine GAAP and US GAAP as they relate to the Company are described in Note 18, together with an explanation, where appropriate, of the method used in the determination of the necessary adjustments.

The following is a summary of the significant adjustments to net income (loss) for each of the three years in the period ended December 31, 2010 and shareholders' equity as of December 31, 2010 and 2009 which would be required if US GAAP had been applied instead of Argentine GAAP in the consolidated financial statements.

	December 31,
	2010	2009
Reconciliation of shareholders' equity:
Shareholders' equity in accordance with Argentine GAAP	825,904	897,601
US GAAP adjustments:
- Other receivables (Note 18 b))	(98,089)	(113,138)
- Troubled debt restructuring (Note 18 c))	-	(288,845)
- Inventory valuation (Note 18 d))	(2,379)	(2,200)
- Discounted value of certain receivables (Note 18 e))	1,144	1,422
- Deferred income taxes (Note 18 f))	(297,973)	(269,059)
MetroGAS shareholders' equity in accordance with US GAAP	428,607	225,781
Non controlling interest	1,604	1,346
Shareholders' equity in accordance with US GAAP	430,211	227,127

NOTE 17 - RECONCILIATION OF SHAREHOLDERS' EQUITY AND NET INCOME TO US GAAP (Contd.)

	December 31,
	2010		2009	2008
Reconciliation of net income:
Net loss in accordance with Argentine GAAP	(71,697)	(78,342)			(13,549)
US GAAP adjustments - Increase (Decrease):
- Other receivables (Note 18 b))	15,049	(14,019)			(17,851)
- Troubled debt restructuring (Note 18 c))	288,845	49,911			43,024
- Inventory valuation (Note 18 d))	(179)	(340)			(447)
- Discounted value of certain receivables (Note 18 e))	(278)	(277)			(275)
- Deferred income taxes (Note 18 f))	(28,914)	(145,381)			8,173
MetroGAS' Net income (loss) in accordance with US GAAP	202,826	(188,448)			19,075
Non controlling interest	258	298			244
Net income (loss) in accordance with US GAAP	203,084	(188,150)			19,319

Earnings per share Basic & Diluted:
Argentine GAAP
(Loss) income per share	(0.126)	(0.138)			(0.024)
(Loss) income per ADS	(1.260)	(1.376)			(0.238)
US GAAP
Income (Loss) per share	0.356	(0.331)			0.034
Income (Loss) per ADS	3.564	(3.311)			0.335
Shares subscribed, registered and paid-in	569,171,208	569,171,208			569,171,208

Description of changes in shareholders' equity under US GAAP:	December 31,
	2010	2009
Shareholders' equity in accordance with US GAAP as of beginning of year	227,127	415,277
Net income (loss) in accordance with US GAAP	202,826	(188,448)
MetroGAS shareholders' equity in accordance US GAAP as of end of year	429,953	226,829
Non-controlling interest	258	298
Shareholders' equity in accordance US GAAP as of end of year	430,211	227,127

NOTE 18 - SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ARGENTINE GAAP AND US GAAP

The principal differences between Argentine GAAP and US GAAP are reflected in the reconciliations provided and principally relate to the items discussed in the following paragraphs:

a) Inflation accounting

As indicated in Note 3.4, under Argentine GAAP, the restatement of consolidated financial statements into constant currency has been discontinued as of March 1, 2003. This criterion is not in accordance with prevailing professional accounting standards, under which consolidated financial statements must be restated until September 30, 2003. This deviation from prevailing professional accounting standards does not have a significant effect on the Company's consolidated financial statements as of December 31, 2010, 2009 and 2008. Moreover, inflation accounting does not have a significant effect on the US GAAP information for fiscal years ended December 31, 2010, 2009 and 2008.

Under US GAAP, financial statements are prepared on a historical cost basis. However, the following reconciliation does not include the reversal of the adjustments to the consolidated financial statements for the effects of inflation, because, as permitted by the SEC, it represents a comprehensive measure of the effects of price-level changes in the Argentine economy, and as such, is considered a more meaningful presentation than historical cost-based financial reporting for both Argentine GAAP and US GAAP.

The principal differences, other than inflation accounting, between Argentine GAAP and US GAAP are described below, together with an explanation, where appropriate, of the method used in the determination of the necessary adjustments.

b) Other receivables

As discussed in Note 9.4.5, the Company recognized as a regulatory asset and a regulatory liability for certain pass-through items such as levies for study, review and inspection of works in public spaces of the City of Buenos Aires and levies for occupancy of public space for the City of Buenos Aires and other location. Under US GAAP, the Company assessed the provisions contained in ASC 980 "Regulated operations" ("ASC 980") and determined that it was not applicable. Therefore, the US GAAP reconciling item reflects the reversal of this regulatory asset. The recovery registered as of December 31, 2010 was mainly due to the fact that the reversal of the present value discount is higher than the credits capitalized in 2010.

NOTE 18 - SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ARGENTINE GAAP AND US GAAP (Contd.)

c) Troubled debt Restructuring

As discussed in Note 10, the Company completed the restructuring of its outstanding indebtedness in May 2006 (the "Debt Restructuring"). The Debt Restructuring involved the combination of a partial debt settlement and a refinancing of the remaining outstanding loans of the entities with modified terms. In this regards, the Company issued new debt instruments.

Under Argentine GAAP, during the year ended December 31, 2006, the Company recorded a net pre-tax gain on debt restructuring of Ps. 388.7 million. Under Argentine GAAP, the new debt instruments issued by the Company were recorded at present value at the restructuring date. The present value of the future cash payments is determined using their internal rate of return, and then discounted at a rate commensurate with the risks involved. The internal rate of return of the future cash payments at the date of the Debt Restructuring was 6% and 10.81% for Series 1 and Series 2 Notes denominated in US Dollars respectively, and 4.51% for Series 2 Notes denominated in Euro; and the discount rate used was 10.21 %. Under Argentine GAAP, the gain on Debt Restructuring is computed as the difference between the carrying amount of the original debt and the present value of the future cash payments. The new debt instruments are subsequently accreted to their respective face value using the interest method. Loss on accretion is recorded in the statement of operations. The Company recorded Ps. (82.0) million and Ps. (71.0) million on loss on accretion for the year ended December 31, 2009 and 2008, respectively.

Under US GAAP, the Company performed an analysis under ASC 470-60 "Troubled Debt Restructuring" ("ASC 470-60"), to assess whether the Debt Restructuring represented a troubled debt restructuring. Following the ASC 470-60 guidance, the Company concluded that the Debt Restructuring was in fact a troubled debt restructuring since (i) the Company was in financial difficulties and (ii) creditors had granted it a concession. The concessions resulted primarily from the partial discount on principal and accrued interest, extension of maturity and full forgiveness of penalty interest. Accordingly, under US GAAP, the Debt Restructuring was accounted for as a combination of a partial debt settlement and a continuation of debt with modified terms.

ASC 470-60 required an assessment of the total future cash payments specified by the new terms of the debt, including principal, and interest (and contingent payment, if applicable) on a payable-by-payable basis. Under ASC 470-60, no gain on restructuring is recognized unless the remaining carrying amount of the debt exceeds the total future cash payments specified by the new terms.

Accordingly, for those restructured payables where their total future cash payments specified by the new terms were less than the respective carrying amounts (eight out of nine payables), then the carrying amounts were reduced to an amount equal to the total future cash payments specified by the new terms, and a gain on restructuring was recognized under US GAAP equal to the amount of the reduction. Thereafter, all cash payments under the new terms are accounted for as reductions of the carrying amount of the payables and no interest expense is recognized.

NOTE 18 - SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ARGENTINE GAAP AND US GAAP (Contd.)

On the other hand, for those restructured payables where their carrying value did not exceed the total future cash payments specified by the terms of the new instruments, no gain was recognized under US GAAP as of the date of the Debt Restructuring. The carrying values of the loans are being reduced as payments are made. Interest expense is computed as the discount rate that equated the present value of the future cash payments specified by the new debt with the carrying amount of the original payables.

In summary, the US GAAP reconciling item until June 17, 2010, reflects:

the reversal of the effect of discounting the future cash payments at a rate of 10.21 % under Argentine GAAP;

the reversal of the interest expense computed under Argentine GAAP, and

the computation of financial expenses under US GAAP, which include interest expense (for the payable for which no gain was recognized under US GAAP) and exchange differences between Euros and US$.

The items for Debt Restructuring, included in the reconciliation of net income (loss) are as follows:

	December 31,
	2010	2009	2008
	Million of Ps.
a) Reversal of the present value recognized under Argentine GAAP	49	12	12
b) Reversal of Interest loss computed under Argentine GAAP	33	70	59
c) Computation of Financial Income (Loss) under US GAAP	(10)	(32)	(28)
Total US GAAP Income reconciling item for Debt Restructuring	72	50	43

However, since June 17, 2010, due to our reorganization procedure filing (see Note 2), we applied the provisions of bankruptcy accounting of ASC 852 as the processes of "concurso preventivo" is similar to the proceeding applicable in the US. One of those provisions is that any debt that is subject to compromise is shown at its allowed claim amount. The Company's unsecured debt is subject to compromise. As of June 17, 2010, the carrying value of the debt under US GAAP was Ps. 1,251.0 million and the allowed claim amount was Ps. 1,034.6 million. The difference between the carrying value and the allowed claim amount is due to prior adjustments to the carrying value as a result of the 2006 troubled debt restructuring as described above. Therefore, for 2010 we adjusted the carrying value of the debt to its allowed claim amount, which resulted in a gain of Ps. 216.4 million.

Furthermore, ASC 852-10 requires the separation of the liabilities incurred before the reorganization filing, and to classify these separately under "subject to compromise" and "not subject to compromise". Under Argentine GAAP the pre-petition liabilities are shown as "Reorganization Liabilities" in non-current liabilities. There is no difference between Argentine GAAP and US GAAP in this regard, except that, for US GAAP purposes, these amounts would have been labeled "Liabilities subject to compromise"

The gain resulting from the adjustment is in the line "Financial and holding results" for an amount of Ps. 72.4 million. Reorganization item for the year ended December 31, 2010 was separated in the statement ofoperations for US GAAP purposes, for an amount of Ps. 206.1 million, which includes a gain of Ps. 216.4 million from the adjustment mentioned above and a loss of Ps. 10.3 million from legal and other reorganization expenses.

NOTE 18 - SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ARGENTINE GAAP AND US GAAP (Contd.)

d) Inventory valuation

As described in Note 3.6.f), the Company values its inventories at replacement cost. Under US GAAP in accordance with ASC 330 "Inventory", inventories are valued at the lower of cost or realizable value.

e) Discounted value of certain receivables

Under Argentine GAAP certain long-term receivables and liabilities (except for deferred tax assets and liabilities) are valued based on the best estimate of the present value, calculated as the discounted value of amounts expected to be collected or paid, as applicable. Accordingly, the Company recorded a Ps. 1.1 million, Ps. 1.4 million and Ps. 1.7 million, as the discount of the receivable for minimum presumed income tax (as discussed below) for the years ended December 31, 2010, 2009 and 2008, respectively. Those adjustments were reversed for US GAAP purposes.

f) Income tax

i) Deferred income tax

As discussed in Note 3.6.h), the Company records income taxes using the liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recorded or settled. The effect of a change in tax rates is recognized in income in the period when enacted. A valuation allowance is recognized for a component of net deferred tax assets, which is assessed as not recoverable.

While this standard is similar to the principles of US GAAP set forth in ASC 740 "Income Taxes" ("ASC 740") there are certain differences between both standards detailed below.

ASC 740 states more specific and strict rules to determine whether a valuation allowance is needed. Under ASC 740, a company must use its judgment in considering the relative impact of negative and positive evidence to determine if a valuation allowance is needed or not. For example, negative evidence includes (a) losses expected in early future years by a presently profitable entity; (b) unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels on a continuing basis in future years; and (c) a carryforward that is so short that it would limit realization of tax benefits if significant deductible temporary differences are expected to reverse in a single year.

NOTE 18 - SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ARGENTINE GAAP AND US GAAP (Contd.)

Furthermore, ASC 740 indicates that a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome and thereby requires positive evidence of sufficient quality and quantity to support a conclusion that, based on the weight of all available evidence, a valuation allowance is not needed. When assessing whether a company's deferred tax asset will be realized, a company's recent losses or near-term expected losses will generally carry more weight in the assessment than its prior historic profitability or its longer-term projected profitability (which is typically more subjective in nature). Therefore, the existence of a 3-year cumulative loss in a jurisdiction, particularly if it includes multiple periods of significant annual losses without recent evidence of turnaround, will effectively preclude in most instances consideration of future profitability as being objectively verifiable.

In addition, under Argentine GAAP, the Company has treated the differences between the price-level restated amounts of assets and liabilities and their historical basis as permanent differences for deferred income tax calculation purposes in accordance with Resolution MD No. 11/03 issued by the CPCECABA. Under US GAAP, the Company applies ASC 830-740, "Foreign currency matters - Income taxes" ("ASC 830-740"), which requires such differences to be treated as temporary differences in calculating deferred income taxes.

Therefore, for the years ended December 31, 2010, 2009 and 2008, the US GAAP reconciling item reflects the effect of (1) recognition of the inflation adjustment as a temporary difference, (2) recognition of deferred income taxes on other Argentine to US GAAP reconciling items and (3) recognition of a valuation allowance of 100% of its tax loss carryforwards, certain of its other deferred tax assets and its credits from minimum presumed income taxes.

As mentioned above under US GAAP, there are more stringent criteria with respect to the assessment of recoverability of deferred income tax assets. Moreover, the use of tax projections is not allowed in certain circumstances. Consequently, as of December 31, 2010 and 2009, under US GAAP, the Company recorded a valuation allowance of Ps. 2.5 million and Ps. 79.1 million, respectively, against its tax loss carryforwards and certain of its other deferred tax assets. However, under Argentine GAAP, no valuation allowance was recorded. Under both US and Argentine GAAP, as of December 31, 2008, based on financial information, the Company was uncertain whether it would fully recover its tax loss carryforward through future taxable income; consequently, the Company recorded a valuation allowance of Ps. 23.3 million.

ii) Minimum presumed income tax

The Company has also recorded an asset (net of its valuation allowance) of Ps. 101.9 million, Ps. 87.4 million and Ps. 75.6 million at December 31, 2010, 2009 and 2008, respectively for the value of its tax credit related to its tax on minimum presumed income. This tax is supplementary to its income tax liability. The tax is calculated by applying the effective tax rate of 1% on the tax basis for certain assets. The final tax liability will be the higher of income tax or minimum presumed income tax. However, if the tax on minimum presumed income exceeds income tax during any fiscal year, such excess may be computed as a prepayment of any income tax excess over the tax on minimum presumed income that may arise during the next ten fiscal years.

NOTE 18 - SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ARGENTINE GAAP AND US GAAP (Contd.)

Under Argentine GAAP, the value of any such minimum presumed income tax credit is based on present value, which is calculated as the discounted value of amounts expected to be collected or paid, as applicable. Accordingly, the Company recorded Ps. 1.1 million, Ps. 1.4 million and Ps. 1.7 million as the discount value of its minimum presumed income tax credits for the years ended December 31, 2010, 2009 and 2008, respectively. For US GAAP purposes, those adjustments were reversed.

Additionally, as discussed above, under US GAAP, the use of tax projections is not allowed in certain circumstances. Consequently, as of December 31, 2010 and 2009, the Company recorded a valuation allowance of Ps. 102.2 million and Ps. 88.9 million, respectively, for its minimum presumed income tax credits. However, under Argentine GAAP, as of December 31, 2010 and 2009, the Company recorded a valuation allowance for its minimum presumed income tax credits which amounts Ps. 21.1 million for the years then ended.

Under both Argentine GAAP and US GAAP, no valuation allowance was recognized as of December 31, 2008 for its minimum presumed income tax credits.

g) Impairment of long-lived assets

As discussed in Note 3.6.o), under Argentine GAAP, the Company evaluates the carrying value of its long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and at the end of each year. For the year ended December 31, 2010, the Company identified impairment indicators and performed an impairment test on our property, plant and equipment based on Argentina GAAP guidance. Pursuant to such test, we compared the net carrying amounts of our long-lived assets to the estimated discounted future cash flows expected to be generated by such assets and determined that the assets were not impaired.

Under US GAAP, MetroGAS applied the provisions of ASC 360-10, "Impairment or Disposal of Long-lived Assets" ("ASC 360-10"). Accordingly, under ASC 360-10, the carrying value of long-lived assets is considered impaired when the undiscounted expected cash flows from the assets is separately identifiable and less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the market value of the long-lived asset. If alternative courses of action are expected, different cash flow scenarios are estimated using a probability-weighted approach, which considers the likelihood of each possible outcome. For the year ended December 31, 2010, we identified impairment indicators and performed an impairment test on our property, plant and equipment based on the guidance in ASC 360-10. Pursuant to such test, we determined that our undiscounted expected cash flows exceeded their net carrying value by approximately 200%. Therefore, we did not proceed to step two of the ASC 360-10 impairment analysis and concluded that our property, plant and equipment were not impaired.

In the calculation of the expected future undiscounted cash flows, the Company considers the group of assets as mentioned in Note 3.6.o). Consequently, the Company tested the group of assets for impairment as a whole.

As of December 31, 2010 and 2009, no impairment losses have been recognized under US GAAP as the undiscounted cash flows was higher than the carrying amount of fixed assets.

NOTE 18 - SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ARGENTINE GAAP AND US GAAP (Contd.)

h) Severance indemnities

Under Argentine law and labor agreements, the Company is required to make minimum severance payments to its dismissed employees without cause and employees leaving its employment in certain other circumstances. Under Argentine GAAP, severance payments are expensed as incurred. Under US GAAP, the Company follows the guidelines established by ASC 710 "Compensation - General," ASC 712 "Compensation - Nonretirement postemployment benefits," and ASC 420 "Exit or Disposal cost obligation," which requires the accrual of severance costs if they relate to services already rendered, are related to rights that accumulate or vest, are probable of payment and are reasonably estimable. While the Company expects to make severance payments in the future, it is impossible to estimate the number of employees that will be dismissed without proper cause in the future, if any, and accordingly the Company has not recorded such liability.

NOTE 19 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS

Deferred income taxes

The following table reconciles deferred income taxes under Argentine GAAP to deferred income taxes under US GAAP as of the end of each year:

	December 31,
	2010	2009
Deferred income tax asset according to Argentine GAAP	71,838	42,271
Inventory valuation	833	770
Other receivables	34,331	39,598
Troubled debt restructuring	-	101,096
Discounted value of certain receivables	(400)	(498)
Difference between tax and accounting basis of fixed assets	(249,053)	(263,212)
Valuation allowance on income tax assets	(2,553)	(79,095)
Deferred income tax (liability) according to US GAAP	(145,004)	(159,070)

NOTE 19 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS (Contd.)

Income tax expense computed at the statutory tax rate (35%) on pre-tax income (loss) differs from the income tax charge (benefit) for the years ended December 31, 2010, 2009 and 2008 computed in accordance with US GAAP as follows:

	December 31,
	2010	2009	2008

Income tax benefit at statutory rate on pre tax (loss) income in accordance with US GAAP	76,620	(11,786)	4,447
Valuation allowance on deferred income tax asset i)	(76,542)	55,816	(6,577)
Expiration of tax loss carryforward	-	23,106	-
Valuation allowance minimum presumed income tax	13,417	88,784	-
Permanent differences	2,594	(1,147)	(4,237)
Income tax charge (benefit) computed in accordance with US GAAP	16,089	154,773	(6,367)

for the year 2010 the decrease in the allowance on deferred tax assets for an amount to Ps. 76.5 million was due to the write-off of deferred tax assets from troubled debt restructuring.

b) Earnings per share

Under US GAAP the company applies the provisions of ASC 260, "Earnings per share" ("ASC 260"). ASC 260 requires to disclose in the body of the Statement of Income the diluted income per share as well as basic income per share. As of December 31, 2010, 2009 and 2008 the Company has not issued any shares or rights convertible into shares, which would be considered dilutive. The ratios are shown on a single line on the corresponding Statements of Operations for each year under the heading "Income per share".

c) Balance sheet classification differences

i) Under Argentine GAAP, the net deferred tax asset (liability) has been classified as a non-current tax credit (payable) as of December 31, 2010 and 2009 respectively.

Under US GAAP, the Company applies the principles of ASC 740. Pursuant to ASC 740, the classification of the deferred tax for a temporary difference is determined by the classification of the asset or liability for financial reporting to which the temporary difference is related. A temporary difference is related to an asset or liability if reduction of the asset or liability causes the temporary difference to reverse. For temporary differences not related to an asset or liability for financial reporting or for loss carryforwards, the deferred tax should be classified according to the expected reversal date of the temporary difference or carryforward.

As of December 31, 2010, the net current deferred tax asset is Ps. 54.6 million and the net non-current deferred tax liability is Ps. 199.6 million under US GAAP. As of December 31, 2009, the net current deferred tax asset is Ps. 48.9 million and the net non-current deferred tax liability is Ps. 208.0 million under US GAAP.

NOTE 19 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS (Contd.)

ii) Revenues from installations consist primarily of amounts are charged for the installation of gas meters. Under Argentine GAAP, installation fees are recognized at the time of installation. The direct incremental costs related to installations are expensed as incurred. Installation costs exceed installation revenues for all periods presented. Reconnection fees are charged to customers when resuming service after suspension. Under Argentine GAAP, reconnection fees are also recognized at the time of reconnection. Reconnection costs are also higher than associated revenues for all periods presented.

For US GAAP purposes, non-refundable installation and reconnection fees are deferred and recognized over the estimated customer relationship period. Associated direct expenses are also deferred over the estimated customer relationship period in an amount equal to the amount of deferred revenues. Since installation and reconnection costs exceed installation and reconnection revenues for all periods presented and considering that this excess is recognized immediately, there is no measurement difference between Argentine GAAP and US GAAP in this regard. However, the amount of assets and liabilities under US GAAP would differ as a result of the deferral of revenues and related costs. This effect for US GAAP purposes of recording the related deferred asset and liability is not significant for the years presented.

d) Statement of Operations classification differences - Operating income

Operating income as determined under US GAAP for each of the years presented is as follows:

	December 31,
	2010	2009	2008

Operating income according to Argentine GAAP	56,472	94,086	117,238
Other receivables (1)	15,049	(14,019)	(17,851)
Reorganization item expenses (Reclassification) (2)	10,314	--	--
Operating income according to US GAAP	81,835	80,067	99,387

(1) See Note 18 b)

(2) See Note 18 c)

Financial and holding results

	December 31,
	2010	2009	2008
Financial and holding results according to Argentine GAAP	(146,741)	(170,786)	(130,144)
Discount on other receivables (1)	(278)	(277)	(275)
Inventory valuation (2)	(179)	(340)	(447)
Troubled debt restructuring (3)	72,412	49,911	43,024
Financial and holding results according to US GAAP	(74,786)	(121,492)	(87,842)

(1) See Note 18 e)

(2) See Note 18 d)

(3) See Note 18 c)

NOTE 19 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS (Contd.)

f) Additional information on the Statement of Cash Flows

The statements of cash flows presented in the primary financial statements are prepared based on Argentine GAAP amounts. Under both Argentine GAAP and US GAAP, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As a result, no differences exist between the total amount of the increase or decrease in cash and cash equivalents reported in the primary financial statements and the same totals that would be reported in a statement of cash flows prepared based on US GAAP amounts. However, as discussed further below, certain differences exist between cash flows from operating, investing and financing activities reported in the primary financial statements and the cash flows from operating, investing and financing activities that would be reported under ASC 230 "Statement of Cash Flows" ("ASC 230").

i) Under Argentine GAAP, payments to creditors for interest were reported as financing activities whereas these transactions would be classified as cash flows used in operating activities for US GAAP purposes.

ii) Under US GAAP, the total amounts of cash and cash equivalents at the beginning and end of the periods shown in the statements of cash flows are required to be the same amounts as similarly titled line items shown in the balance sheets, as of those dates. The following table reconciles the balances included as cash and cash and banks in the consolidated balance sheets to the total amounts of cash and cash equivalents at the beginning and end of the periods shown in the consolidated statements of cash flows:

	December 31,
	2010	2009	2008
Cash and banks	49,559	63,562	53,106
Cash equivalents:
Current investments	261,789	64,723	50
Total cash and cash equivalents	311,348	128,285	53,156

iii) Under Argentine GAAP the effect of inflation and the effect of the exchange rate changes on cash and cash equivalents were not disclosed by presenting additional cash flow statement categories as required by US GAAP. The following table presents the cash flows from operating, investing and financing activities and the effect of inflation accounting and of the exchange rate changes on cash and cash equivalents that would be reported in the consolidated statements of cash flows, which contemplate classification differences under US GAAP.

The following tables set forth the condensed statements of cash flows prepared in accordance with US GAAP:

	December 31,
	2010	2009	2008
Net cash provided by operating activities	304,912	178,700	111,141
Net cash used in investing activities	(119,111)	(105,756)	(84,169)
Net cash provided by (used in) by financing activities	(31)	31	(2,844)
Effect of exchange rate changes on cash and cash equivalents	(2,707)	2,154	(5)
Net increase (decrease) in cash and cash equivalents	183,063	75,129	24,123

NOTE 19 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS (Contd.)

g) Summarized financial information under US GAAP

Presented below is the summarized consolidated balance sheet and statement of income information of the Company as of and for the years ended December 31, 2010 and 2009 prepared in accordance with US GAAP, giving effect to differences in measurement methods and classifications as previously discussed.

Summary of Consolidated Balance Sheet in accordance with US GAAP	December 31,
	2010	2009
Current assets	588,811	361,691
Non-current assets	1,724,422	1,689,082
Total assets	2,313,233	2,050,773

Current liabilities	463,061	478,954
Non-current liabilities	1,419,961	1,344,692
Total liabilities	1,883,022	1,823,646

MetroGAS shareholders' equity	428,607	225,781
Non-controlling interest	1,604	1,346
Total shareholders' equity	430,211	227,127

Summary of Consolidated Statement of Operations in accordance with US GAAP	December 31,
	2010	2009	2008
Sales	1,080,312	1,039,691	871,961
Gross profit	271,124	270,107	259,008
Operating income	81,835	80,067	99,387
Reorganization item (*)	206,119	-	-
Financial and holding results (**)	(74,786)	(121,492)	(87,842)
Other income, net	6,005	8,048	1,408
Minority interest	(258)	(298)	(245)
Income (Loss) before income tax	218,915	(33,675)	12,708
Income tax (expense) benefit	(16,089)	(154,773)	6,367
MetroGAS' net income (loss) under US GAAP	202,826	(188,448)	19,075
Non-controlling interest	258	298	244
Net income (loss) under US GAAP	203,084	(188,150)	19,319

(*) Reorganization item includes i) Ps. 10.3 million as professional fees incurred in connection with reorganization procedure, which was classified in the line item "Administrative expenses" under Argentine GAAP; and ii) Ps. 216.4 million from the reversal of the accumulated effect of the reconciliation item for Troubled debt restructuring as of December 31, 2010, due to the application of the provisions of bankruptcy accounting of ASC 852 (See Note 18c)).

(**) The item "Financial and holding results" under US GAAP includes Ps. 72.4 million from the reconciliation item for Debt restructuring as of June 17, 2010.

NOTE 19 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS (Contd.)

h) Fair Value

Under Argentine GAAP, there are no specific rules regarding disclosure of the fair value of financial instruments. Under US GAAP, fair values are required to be disclosed under ASC 820, "Fair Value Measurements and disclosures" ("ASC 820").

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the Company's financial assets measured at fair value on a recurring basis in accordance with ASC 820 as of December 31, 2010 and 2009:

Description	Balances as of December 31, 2010		Balances as of December 31, 2009
Assets		Thousand of Ps.		Thousand of Ps.
Investments
Government securities and Common investment funds		106,211		58,892
Total Financial Assets		106,211		58,892

The Company's financial assets are valued using market prices on active markets (level 1). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets. As of December 31, 2010 and 2009, the Company did not have any assets or liabilities obtained from readily-available pricing sources for comparable instruments (level 2) or without observable market values that would require a high level of judgment to determine fair value (level 3). The unrealized net gains on short term investments are reported as a line item in the Statement of Operations.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company measures certain assets, including equity method investments, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of the Company's investments are determined based on valuation techniques using the best information available and may include quoted market prices, market comparable, and discounted cash flow projections.

An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other than temporarily impaired. During the years ended December 31, 2010 and 2009, the Company did not record any such impairments for these assets.

i) Disclosures about fair value of financial instruments

Under Argentine GAAP, there are no specific rules regarding disclosure of the fair value of financial instruments. Under US GAAP, ASC 825, "Financial Instruments" ("ASC 825") and ASC 815, "Derivatives and Hedging" ("ASC 815"), the Company is required to disclose fair value information for financial instruments (whether or not recognized in the balance sheet) for which it is practicable to estimate fair value, including the

NOTE 19 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS (Contd.)

disclosure requirements regarding credit risk concentrations (See Note 3.9. for details on the Company's concentration of credit risk). The financial instruments which are discussed in this section pursuant to ASC 825 are, among others, cash and cash equivalents, accounts receivable, accounts payable and other instruments.

The methods and assumptions used to estimate the fair values of each class of financial instrument as of December 31, 2010 and 2009 are as follows:

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. The carrying amount reported in the balance sheet approximates fair value.

Accounts receivable, net

The carrying amount of accounts receivables, net reported in the balance sheet approximates fair value because these are short term assets and there have been no significant changes in interest rates. Furthermore, all amounts assumed to be uncollectible after a reasonable time are written off and/or reserved.

Accounts payable

The carrying amount of accounts payable reported in the balance sheet approximates its fair value due to the short term nature of these accounts payable and no significant changes in interest rates.

Other receivables and other liabilities

The carrying amount of other receivables and other liabilities reported in the balance sheet approximates fair value due to their short-term nature.

Financial debt

The fair value of the Company's financial debt as of December 31, 2010 is based on quoted market prices. As of December 31, 2010, the fair value of the Company's debt principal amount (without interest) was Ps. 450,292 and the related carrying amount was Ps. 1,000,649 under Argentine GAAP. As of December 31, 2009, the fair value of the Company's debt was Ps. 444,886 and the related carrying amount was Ps. 920,634 under Argentine GAAP. As of December 31, 2010, the functional currency fair value is higher than in 2009 due to the devaluation of the Argentine peso against the dollar / euro, and not to changes in fair value measured in foreign currency.

j) Segment information

Under US GAAP, the Company applies the criteria set forth by ASC 280, "Segment reporting" ("ASC 280"). ASC 280, which was issued by the Financial Accounting Standards Board ("FASB") in June 1997, establishes standards for reporting information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial reports issued to shareholders. Operating

NOTE 19 - OTHER SIGNIFICANT US GAAP DISCLOSURE REQUIREMENTS (Contd.)

segments are components of a company about which separate financial information is available that is regularly evaluated by the chief operating decision marker(s) in deciding how to allocate resources and assess performance. Disclosure requirements established under US GAAP do not differ from those required under Argentine GAAP (See Note 3.8).

NOTE 20 - RECENT ACCOUNTING PRONOUNCEMENTS

Amendments to FASB Interpretation No. 46(R)-Consolidation of Variable Interest Entities

In June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No. 46(R).SFAS No. 167 amends FASB guidance No. 46,Consolidation of Variable Interest Entities-an interpretation of ARB No. 51. SFAS No. 167 requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and clarifies the application of consolidation guidance for certain entities (variable interest entities, or "VIEs") in which the party with a controlling financial interest might not be solely identified through voting rights.

SFAS No. 167 obligates an enterprise to qualitatively assess the determination of the primary beneficiary of a VIE based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The amended guidance also changes the consideration of kick-out rights in determining if an entity is a VIE, which may cause certain additional entities to now be deemed VIEs.

SFAS No. 167 is effective for annual reporting periods that begin after November 15, 2009. Its application will not have a material impact on the Company's financial position and results of operations

Accounting for Transfers of Financial Assets-an Amendment of FAS No. 140

In June 2009, the FASB issued SFAS No. 166,Accounting for Transfers of Financial Assets-an Amendment of FAS No. 140. This statement establishes (1) the conditions that an entity must meet to be considered a qualifying special-purpose entity ("QSPE"), (2) eliminates the exceptions for QSPE from the consolidation guidance, (3) eliminates the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets, and (4) establishes the conditions necessary for a transfer of financial assets to be counted as a sale or as a secured borrowing. If the conditions are not met, said transfer should count as a sale only if it transfers an entire financial asset and surrenders control over the entire financial asset. Enhanced disclosures are required.

SFAS No. 166 applies to all entities for new transfers of financial assets occurring in fiscal years beginning after November 15, 2009. The adoption of SFAS No. 166 will not have a material impact on the Company's financial position and results of operations

Subsequent Events

In February 2010, the FASB issued Accounting Standards Update ("ASU") 2010-09, amending ASC Topic 855. The amendment removes the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or were available to be issued. The amendment, however, requires for conduit bond obligors the evaluation of subsequent events through the date the statements are issued and the disclosure of this date.

Conduit bond obligors will be required to apply the requirements of this guidance in fiscal periods ending after June 15, 2010. ASU 2010-09 applied upon its issuance to all other entities. The Company's consolidated financial statements were updated to reflect the disclosure requirements.

NOTE 20 - RECENT ACCOUNTING PRONOUNCEMENTS (Contd.)

Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses

In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-20,"Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses", which amends the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. The guidance is effective for annual and interim reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures, which are effective for annual and interim periods beginning after December 15, 2010. The Company adopted these amendments in 2010 and the adoption did not have a material impact on the disclosures in the Company's consolidated financial statements.

Improving Disclosures about Fair Value Measurements

In July 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-06,"Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements", that will require additional disclosures about the credit quality of loans, lease receivables and other long-term receivables and the related allowance for credit losses. Certain additional disclosures in this new accounting guidance will be effective for the Company on December 31, 2010 with certain other additional disclosures that will be effective in 2011. The Company does not expect the adoption of this accounting guidance to have a material impact on its consolidated financial statements.

NOTE 21 - OTHER CONSOLIDATED FINANCIAL STATEMENT INFORMATION

The following tables present additional consolidated financial statement disclosures required under Argentine GAAP. This information is not a required part of the basic financial statements under US GAAP, however, certain of these tables substantially duplicate the schedule requirements of the SEC. Separate financial statements schedules were, therefore, not prepared for purposes of the Annual Report of which these financial statements constitute a part:

a) Foreign currency assets and liabilities;

b) Expenses incurred;

c) Operating costs;

d) Allowances.

NOTE 21 - OTHER CONSOLIDATED FINANCIAL STATEMENT INFORMATION (Contd.)

FOREIGN CURRENCY ASSETS AND LIABILITIES

MAIN ACCOUNT	December 31, 2010			December 31, 2009
MAIN ACCOUNT	FOREIGN CURRENCY AND AMOUNT	EXCHANGE RATE	BOOK VALUE	FOREIGN CURRENCY AND AMOUNT	BOOK VALUE
	Thousands		Thousands of Ps.	Thousands	Thousands of Ps.
ASSETS
CURRENT ASSETS
Cash and banks
Cash	US$ 29	3.9360	114	US$ 30	113
	LBE 4	6.0492	24	LBE 4	24
	Euros 3	5.2191	16	Euros 3	16
	Real 5	2.3200	12	Real 3	6
	Canadian Dollars -	3.9270	-	Canadian Dollars 1	4
	Russian ruble -	0.1316	-	Russian ruble 8	1

Banks	US$ 2,682	3.9360	10,556	US$ 606	2,279
	Euros 1	5.2191	5	Euros -	-
Investments	US$ 38,037	3.9360	149,714	US$ 315	1,184

Trade receivables	US$ 13,865	3.9360	54,573	US$ 11,723	44,078

Other receivables	US$ 495	3.9360	1,948	US$ 445	1,673
Total Current Assets			216,962		49,378
TOTAL ASSETS			216,962		49,378

LIABILITIES
CURRENT LIABILITIES
Accounts payable	US$ 11,363	3.9760	45,179	US$ 10,991	41,766
	Euros 2	5.2726	11	Euros 50	273
	LBE 27	6.1187	165	LBE 22	135
Financial debt
Negotiable bonds (face value)	US$ -	3.9760	-	US$ 21,085	80,121
	Euros -	5.2726	-	Euros 303	1,653
Interest and other expenses payable to foreign financial institutions	US$ -	3.9760	-	US$ 23	88
	Euros -	5.2726	-	Euros 162	884


Total Current Liabilities			45,355		124,920

MAIN ACCOUNT	December 31, 2010			December 31, 2009
MAIN ACCOUNT	FOREIGN CURRENCY AND AMOUNT	EXCHANGE RATE	BOOK VALUE	FOREIGN CURRENCY AND AMOUNT	BOOK VALUE
	Thousands		Thousands of Ps.	Thousands	Thousands of Ps.
NON-CURRENT LIABILITIES
Financial debt
Negotiable bonds (face value)	US$ -	3.9760	-	US$ 196,016	744,860
	Euros -	5.2726	-	Euro 26,070	142,162
Reorganization liability
Accounts payable	US$ 12	3.9760	48	US$ -	-
Financial debt	US$ 225,022	3.9760	894,688	US$ -	-
	Euro 26,527	5.2726	139,868	Euro -	-
Total Non-Current Liabilities			1,034,604		887,022
TOTAL LIABILITIES			1,079,959		1,011,942

US$: United States Dollars

LBE: Pounds Sterling

NOTE 21 - OTHER CONSOLIDATED FINANCIAL STATEMENT INFORMATION (Contd.)

b) EXPENSES INCURRED

MAIN ACCOUNT	December 31, 2010						December 31, 2009	December 31, 2008
	FIXED ASSETS EXPENSES	OPERATING EXPENSES		ADMINISTRATIVE EXPENSES	SELLING EXPENSES	TOTAL	TOTAL	TOTAL
	FIXED ASSETS EXPENSES	GAS SALES	PROCESSED NATURAL GAS	ADMINISTRATIVE EXPENSES	SELLING EXPENSES	TOTAL	TOTAL	TOTAL
Payroll and other employees benefits	4,509	44,953	-	44,818	38,318	132,598	106,022	91,858
Social security contributions	1,838	13,554	-	11,102	12,007	38,501	29,986	24,206
Directors' fee	-	-	-	1,309	-	1,309	1,082	858
Fees for professional services	-	549	-	12,908	203	13,660	7,113	4,305
Technical operator's fees	-	-	-	-	-	-	-	9,029
Sundry materials	-	4,400	-	-	-	4,400	4,480	3,820
Fees for sundry services	-	16,232	-	974	13,732	30,938	27,709	21,826
Postage, telephone and fax	-	721	-	1,337	10,037	12,095	9,946	6,227
Leases	-	131	-	2,863	1,303	4,297	3,075	2,701
Transportation and freight charges	-	-	-	1,206	-	1,206	790	632
Office materials	-	574	-	1,322	170	2,066	1,957	1,724
Travelling expenses	-	397	-	347	88	832	750	832
Insurance premium	-	-	-	3,467	-	3,467	2,949	2,282
Fixed assets maintenance	-	30,637	-	10,460	90	41,187	32,752	26,285
Fixed assets depreciation	-	68,965	-	5,456	-	74,421	71,331	69,168
Taxes, rates and contributions	-	2,319	35	16,050	42,146	60,550	47,121	38,784
Publicity	-	-	-	-	1,053	1,053	1,967	1,020
Allowance for doubtful accounts	-	-	-	-	6,973	6,973	8,174	1,259
Bank expenses and commissions	-	-	-	223	6,481	6,704	6,386	5,513
Contingencies reserve	-	-	-	9,464	-	9,464	10,445	12,702
Others	-	2,787	-	525	236	3,548	9,453	(3,707)
Total as of December 31, 2010	6,347	186,219	35	123,831	132,837	449,269	383,488	321,324

Total as of December 31, 2009	4,983	167,908	40	97,659	112,898	383,488

Total as of December 31, 2008	3,399	146,510	42	83,037	88,336	321,324

NOTE 21 - OTHER CONSOLIDATED FINANCIAL STATEMENT INFORMATION (Contd.)

c) OPERATING COSTS

MAIN ACCOUNT	December 31, 2010	December 31, 2009	December 31, 2008
Stock at the beginning of the year
Natural Gas	-	-	-
Processed Natural Gas	-	-	-
	-	-	-

Plus
Purchases
Natural Gas	404,808	387,712	257,228
Processed Natural Gas	-	-	-
	404,808	387,712	257,228

Transportation of Natural Gas	216,150	211,946	207,193
Transportation of Processed Natural Gas	1,976	1,978	1,980
	218,126	213,924	209,173
Operating Costs (Note 21b))
Natural Gas	186,219	167,908	146,510
Processed Natural Gas	35	40	42
	186,254	167,948	146,552

Operating Cost	809,188	769,584	612,953

Natural Gas	807,177	767,566	610,931
Processed Natural Gas	2,011	2,018	2,022

NOTE 21 - OTHER CONSOLIDATED FINANCIAL STATEMENT INFORMATION (Contd.)

d) ALLOWANCES

MAIN ACCOUNT		At the beginning of the year		Increase (recovery)	Decrease	Balance at the end of the year

Deducted from assets

For doubtful accounts	2010	17,378	(1)	6,973	(2,455)	21,896
	2009	13,905		8,174	(4,701)	17,378
	2008	20,359		1,259	(7,713)	13,905

For tax on banking transactions to be recovered	2010	-		-	-	-
	2009	-		-	-	-
	2008	1,435		-	(1,435)	-

For variation of Gross revenue tax province of Buenos Aires	2010	-		-	-	-
	2009	-		-	-	-
	2008	1,481		-	(1,481)	-

For inventory obsolescence	2010	1,835	(2)	(45)	(39)	1,751
	2009	1,710		167	(42)	1,835
	2008	1,620		105	(15)	1,710

For obsolescence of materials	2010	529		88	(2)	615
	2009	609		-	(80)	529
	2008	582		35	(8)	609

For disposal of fixed assets	2010	7,450	(3)	8,581	(7,275)	8,756
	2009	8,850		7,439	(8,839)	7,450
	2008	9,748		5,767	(6,665)	8,850

Valuation allowance on deferred income tax assets	2010	-		-	-	-
	2009	23,279		(173)	(23,106)	-
	2008	29,857		(6,578)	-	23,279

Valuation allowance on minimum presumed income tax	2010	21,066		-	-	21,066
	2009	-		21,066	-	21,066
	2008	-		-	-	-

NOTE 21 - OTHER CONSOLIDATED FINANCIAL STATEMENT INFORMATION (Contd.)

d) ALLOWANCES (contd.)

MAIN ACCOUNT		At the beginning of the year		Increase (recovery)	Decrease	Balance at the end of the year
Included in liabilities
For contingencies
Executive proceedings	2010	14,340	(4)	7,690	(196)	21,834
	2009	9,883		4,842	(385)	14,340
	2008	7,951		2,676	(744)	9,883

Turnover tax GCBA (Note 16.1)	2010	6,978	(4)	9,692	-	16,670
	2009	5,740		1,238	-	6,978
	2008	-		5,740	-	5,740

Rates and charges (Note 16.2)	2010	21,259	(4)	1,067	-	22,326
	2009	20,192		1,067	-	21,259
	2008	19,116		1,076	-	20,192

Fines GCBA (Note 16.3)	2010	837	(4)	1,578	-	2,415
	2009	-		837	-	837
	2008	-		-	-	-

Interpretation disagreements with the Regulatory Authority (Note 16.4)	2010	22,658	(4)	(13,489)	-	9,169
	2009	16,607		6,051	-	22,658
	2008	13,801		2,806	-	16,607

Others	2010	4,704	(4)	2,926	(946)	6,684
	2009	9,921		(3,590)	(1,627)	4,704
	2008	9,517		404	-	9,921
Notes:
(1) The charge in results is disclosed in Note 21 b).
(2) Charged in results in the line Sundry materials of Note 21 b).
(3) Charged in results in the line Operating expenses - Others of Note 21 b)
(4) The charge in results is disclosed in Note 21 b).

Positive
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Constraining
Legalese
Litigous
Readability	8th grade Avg

Metrogas (MGS) Inactive 20-F2010 FY Annual report (foreign)

Content analysis

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis