SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

[ ]

REGISTRATION STATEMENT PURSUANT TOSECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 20142015

OR

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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

OR

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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 __________.

Commission file number: 1-13.396

TRANSPORTADORA DE GAS DEL SUR S.A.

(Exact name of Registrant as specified in its charter)

GAS TRANSPORTER OF THE SOUTH INC.

(Translation of Registrant’s name into English)

Republic of Argentina

(Jurisdiction of incorporation or organization)

Don Bosco 3672

5th Floor

C1206ABF City of Buenos Aires

Argentina

(Address of principal executive offices)

Leandro Pérez Castaño

(54-11)-4865-9077

inversores@tgs.com.ar

 (Name, telephone, email and/or facsimile number of our contact person)

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

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

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

None

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

None

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:

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

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.

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.

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 (§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).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Indicate by check mark which bases of accounting the registrant has used to prepare the financial statements included in this filing:

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.

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).

TABLE OF CONTENTS

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this annual report on Form 20-F (“Annual Report”), references to “pesos” or “Ps.” are to Argentine pesos, and references to “U.S. dollars,” “dollars” or “US$” are to United States dollars. A “billion” is a thousand million. References to “km” are to kilometers. References to “m³” are to cubic meters. References to “cf” are to cubic feet, to “MMcf” are to millions of cubic feet, to “Bcf” are to billions of cubic feet, to “d” are to day and to “HP” are to horsepower.

Financial Statements

The audited consolidated financial statements as of December 31, 20142015 and 20132014 and for the years ended December 31, 2015, 2014 2013 and 20122013 included in this Annual Report (our“Financial Statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), adopted by theFederación Argentina de Consejos Profesionales de Ciencias Económicas (“FACPCE”) as its professional accounting standards and added by theComisión Nacional de Valores (“CNV”) to its regulations.

Pursuant to Resolution No. 562/09 of the CNV, as amended by CNV’s Resolution No. 576/10, all listed companies in Argentina, subject to certain exceptions (i.e. financial institutions and insurance entities) were required to present their audited consolidated financial statements for accounting periods beginning on or after January 1, 2012 in accordance with IFRS as issued by the IASB. However, on January 24, 2012, the CNV issued Resolution No. 600, which postponed the mandatory adoption of IFRS for natural gas transportation and distribution companies for fiscal periods beginning on January 1, 2013. On December 20, 2012, the CNV issued Resolution No. 613, which provided that such companies with calendar year-endsyear-end must prepare their financial statements on the basis of IFRS beginning with the fiscal years ended December 31, 2013.

Therefore, we fully adopted IFRS for the first time for our financial year ended December 31, 2013. All IFRS standards effective at the date of the preparation of our Financial Statements were applied. The opening IFRS statement of financial position was prepared as of our Transition Date of January 1, 2012 (the(“Transition Date”).

Our Financial Statements as of and for the yearyears ended December 31, 20142015 and 20132014 have been audited by Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina (“PwC”) member firm of PricewaterhouseCoopers International Limited, an independent registered public accounting firm, whose report dated April 29, 2015May 2, 2016 is included herein.

Other Information

Unless otherwise specified, all exchange rate information contained in this Annual Report has been derived from information published byBanco de la Nación Argentina S.A.(“Banco Nación”), without any independent verification by us. See “Item 3. Key Information. A.—A. Selected Financial Data. Exchange—Exchange Rate Information.”

Certain monetary amounts shownand other figures included in this Annual Report areannual report have been subject to rounding. Accordingly, figures shown asrounding adjustments. Any discrepancies in any tables between the totals in certain tables may not be an exact arithmetic aggregateand the sums of the other figures in such table.amounts are due to rounding.

References to “we,” “us” and “our” mean Transportadora de Gas del Sur S.A. (“TGS”) and its consolidated subsidiary, Telcosur S.A. (“Telcosur”).

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Annual Report, including information incorporated by reference herein, may constitute forward-looking statements within the meaning of the United States Private

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Securities Litigation Reform Act of 1995, as amended. These forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “will likely result,” “intend,”

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·

risks and uncertainties resulting from Government regulations that affect our business or financial condition or results of operations, such as the prohibition on tariff increases related to our natural gas transportation segment, restrictions on payments abroad and exchange controls;

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capital expenditures effectively required by ENARGAS or other governmental authorities for the expansion of our pipeline system or other purposes, including the risk that we may be forced to make investments or take other actions that are not profitable or are not as commercially attractive as other actions;

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risks and uncertainties associated with unscheduled and unexpected expenditures for the repair and maintenance of our fixed or capital assets;

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risks and uncertainties resulting from the prospect of additional Government regulation or other Government involvement in our business;

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developments in legal and administrative proceedings involving us and our affiliates;

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changes to or revocation of our License;

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risks and uncertainties impacting us as a whole, including changes in general economic conditions, changes in Argentine laws and regulations to which we are subject, including tax, environmental and employment laws and regulations, and the cost and effects of legal and administrative claims and proceedings against us; and

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risks and uncertainties regarding our ability to purchase and the value of U.S. dollars from the Argentine Central Bank (“BCRA”) in the exchange market, orMercado Único y Libre de Cambios (“MULC”), and transfer them outside of Argentina to pay our financial debt and dividends or purchase goods or services..

Our actual results may differ materially from the results anticipated in these forward-looking statements because such statements, by their nature, involve estimates, assumptions and uncertainties. The forward-looking statements contained in this Annual Report speak only as of the date of this Annual Report and we do not undertake any obligation to update any forward-looking statement or other information to reflect events or circumstances occurring after the date of this Annual Report or to reflect the occurrence of unanticipated events.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A.

Selected Financial Data

The following selected consolidated financial data is derived from our Financial Statements. This information should be read in conjunction with and is qualified in its entirety by reference to our Financial Statements, including the report of the independent registered public accounting firm thereon and the notes related thereto, and the discussion in “Presentation of Financial and Other Information” and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this Annual Report.

This Annual Report contains our Financial Statements prepared in accordance with IFRS and these have been approved by resolution of the Board of Directors (the “Board of Directors”) meeting held on February 3, 2015. The selected consolidated statement of comprehensive income data for the years ended December 31, 2014, 2013 and 2012 and the selected consolidated statements of financial position data as of December 31, 2014 and 2013, have been prepared in accordance with and comply with IFRS and have been derived from our Financial Statements, which were audited by PwC, whose report dated April 29, 2015 is included herein.

Until the year ended December 31, 2012, our consolidated financial statements were prepared in accordance with Argentine GAAP and in accordance with the rules of the CNV, which differs in certain respects from IFRS. For important information relating to our Financial Statements, including information relating to the preparation and presentation of the Financial Statements and the following selected financial data, see “Presentation of Financial and Other Information” above.

On February 7, 2014, we concluded the Exchangeexchange of 67% of our notes issued under the Medium Term Note Program in 2007. For further information, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources”. Also, on April 7, 2014, the ENARGAS issued Resolution No. I-2852 (the “Resolution No. I-2852”) containing the new rate schedules authorizing an increase to the rate applicable to the natural gas firm and interruptible transportation rates. For further information see “Item 4 – B. Business Overview – Gas Transportation – Regulatory Framework – The Public Emergency Law and UNIREN”.

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⁽¹⁾ Stated in Ps. as of the payment date.

⁽²⁾Stated in U.S. dollars translated from pesos at the exchange rate in effect on the payment date, the dividends payment pending as of December 31, 2014 were translated from pesos at the selling exchange rate at such date.

 ⁽³⁾The Future Dividend Payment Reserve (the(“Future Dividend Payment Reserve”) created by the General Annual Shareholders’ Meeting held on April 12, 2012 was fully released by Board of Directors’ meetings held on December 6, 2012 and on March 18, 2013, which both approved cash dividend payments which were made after compliance with applicable regulatory procedures during the first half of 2013.

⁽⁴⁾The Future Dividend Payment Reserve created by the General Annual Shareholders’ Meeting held on April 30, 2014 was fully consumedreleased by the Board of Directors’ meeting held on November 26, 2014, which approved cash dividend payments. As

⁽⁵⁾The Future Dividend Payment Reserve created by the General Annual Shareholders’ Meeting held on April 23, 2015 was fully released by the Board of the date of issuance of this Annual Report, theDirectors’ meeting held on January 13, 2016, which approved cash dividend payment related to the ADS is still pending due to the BCRA authorization to access the MULC.payments.

DividendsAccording to Argentina’s Law No. 19,550 (“General Companies Law”), dividends may be lawfully declared and paid only out of our retained earnings reflected in our Financial Statementsthe financial statements and must be approved at a General Annual Shareholders’ Meeting, as described below.

According to Argentine Commercial Companies Law No. 19,550 (the “Commercial Companies Law”),To that extent, the Board of Directors must annually submit yearly our financial statements for the preceding fiscal year, together with reports thereon by our Statutorystatutory committee (the(“Statutory Committee”), for the consideration and approval of the shareholders at the General Annual Shareholders’ Meeting whichmust be held annually held to approve our financial statements and determine the allocation of our net income for such year. In the case of listed companies, such as TGS, this meeting must take place before the end of April. Pursuant to the CommercialGeneral Companies Law, companies are required to allocate a legal reserve (the(“Legal Reserve”) equal to at least 5% of each year’s net income, as long as there is no unappropriated retained deficit. If there is such a retained deficit, 5% should be calculated on any excess of the net income over the unappropriated retained deficit. This allocation is only legally required until the aggregate amount of such reserve equals 20% of the sum of (i) “Common stock nominal value” plus (ii) “Cumulative inflation adjustment to common stock,” as shown on our Consolidated Statement of Changes in Shareholders’ Equity (the(“Adjusted Common Stock Nominal Value”). If the Legal Reserve amount is reduced, by any circumstances, we must restore it before making any dividend payment. The Legal Reserve is not available for any dividend distribution.

Pursuant to our Articles of Association (“By-laws”), after the allocation to the Legal Reserve has been made, an amount will be allocated to pay dividends on preferred stock, if any, and an amount equal to 0.25% of the net income for the year will be allocated to pay the participation in earnings of employee profit-sharing certificates. The balance of the retained earnings for the year may be distributed as dividends

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on common stock or retained as a voluntary reserve, as determined at the General Annual Shareholders’ Meeting. The dividend must be paid within 30 days of the shareholders’ decision. For information on dividend taxation, see “Item 10. Additional Information—E. Taxation—Argentine Taxes.”

The General Annual Shareholders’ Meeting held on April 30, 201423, 2015 (the“2015 Shareholders’ Meeting”) approved the creation of a voluntary reserve for a future dividend payment of Ps. 260.599.7 million, for payment of dividends at any time before the General Annual Shareholders’ Meeting held on April 23, 2015 (the“2015 Shareholders’ Meeting”) and a voluntary reserve for future capital expenditures of Ps. 175.0 million (the“Future Capital Expenditures Reserve”), both of which could be usedaffected according to its purpose when our Board of Directors deems appropriate. The 2015appropriate at any time before the General Annual Shareholders’ Meeting will determine the disposition of any outstanding amount of the voluntary reserves mentioned above which remained unused as of the date of the meeting.held on April 20, 2016 (the“2016 Shareholders’ Meeting”). Under the CommercialGeneral Companies Law, the purpose of any voluntary reserve cannot be changed without the prior approval of the shareholders. On November 26, 2014,January 13, 2016, the Board of Directors approved a dividend payment in cash of Ps. 260.599.7 million. This payment fully consumed the future dividends reserve mentioned above.

The 20152016 Shareholders’ Meeting did not approve any dividend payment. Instead, our shareholders approved the creation of a new voluntary reserve for future dividendscapital expenditures of Ps. 99.7 million2.9 million. Our 2015 Financial Statements showed a comprehensive loss, and a new Future

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financial condition and results of operations depend to a significant extent on economic, regulatory and political conditions prevailing in Argentina, the exchange rate between the peso and the U.S. dollar and the reference international prices of Liquids.

Economic volatility in Argentina in recent decades has adversely affected and may continue to adversely affect our financial condition and results of operations.

The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high and variable levels of inflation and currency devaluation. As a consequence, our business and operations have been, and could in the future be, affected from time to time to varying degrees by economic and political developments and other material events affecting the Argentine economy, such as: inflation; price controls; fluctuations in foreign currency exchange rates and interest rates; currency devaluation; governmental policies regarding spending and investment, and other regulatory initiatives increasing government involvement with economic activity; international conflicts; civil unrest; and local insecurity concerns.

During 2001 and 2002, Argentina went through a period of severe political, economic and social crisis. Among other consequences, the crisis resulted in Argentina defaulting on its foreign debt obligations, introducing emergency measures and numerous changes in economic policies that affected utilities and many other sectors of the economy, and suffering a significant real devaluation of the peso, which in turn caused numerous Argentine private sector debtors with foreign currency exposure (including us) to default

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change in methodology was related to the policy of the Government intended to curb the increase of inflation. In addition, the International Monetary Fund (“IMF”) requested several times that Argentina clarify its inflation rates.

On November 23, 2010, the Government began consulting with the IMF for technical assistance in order to prepare a new national consumer price index with the aim of modernizing the current statistical system. During the first quarter of 2011, a team from the IMF started working in conjunction with the INDEC to create such an index. On February 1, 2013, the IMF Executive Board concluded that Argentina’s progress in implementing remedial measures had not been sufficient, issued a declaration of censure against Argentina in connection with the breach of its related obligations to the IMF under the Articles of Agreement and called on Argentina to adopt remedial measures to address the inaccuracy of inflation and GDP data without further delay.

On February 13, 2014, the INDEC released a new inflation index (the“IPCNu”) that measures prices on goods across the country and replaces the previous index that only measured inflation in the urban sprawl of the City of Buenos Aires. In June 2015, IMF Executive Board issued a statement affirming that Argentina was not yet in full compliance with Article VIII, Section 5 of the IMF Articles of Agreement, with respect to the accurate provision of CPI and GDP data to the IMF. The IMF also stated that specified actions called for by end-February 2015 had not yet been completely implemented. For this reason, the IMF Executive Board decided to extend the ongoing process by one year to give Argentina additional time to remedy the provision of inaccurate official data and to undertake an additional set of specified actions. Recently, the government appointed new officials in the INDEC and expressed its intention to restore the credibility of this body. For this reason, the Government declared the national statistics emergency.As a result, INDEC will not publish new information until at least June 2016.

The ability of Argentina to access credit in the capital markets could be limited by the volatility described above, under “—Economic volatility in Argentina in recent decades has adversely affected and may continue to adversely affect our financial condition and results of operations,” but also by the uncertainty relating to the inaccuracy of the economic indexes and rates in question, which could adversely affect our results of operations and financial conditions.

Fluctuations in the value of the peso may also adversely affect the Argentine economy, our financial condition and results of operations.

Since January 2002, the peso has fluctuated significantly in value and generally depreciated against the U.S. dollar, with adverse consequences ofto our business. A substantial increase in the value of the peso against the U.S. dollar could also present risks for the Argentine economy since it may lead to a deterioration of the country’s current account balance and the balance of payments. InBetween 2011 and December 2015, the Government strengthened exchange controls in response to an increase of capital outflows as compared to inflows and to a drop in the commercial surplus. However, these controls were not able to prevent the decrease of international reserves of the BCRA from US$ 43,290 million in 2012 to US$ 27,371 in 2013, US$ 31,433 million in 2014 and US$ 25,267 million in 2015. The decrease in the BCRA’s reserves resulted in Argentina being vulnerable to inflation and external shocks, affecting the country’s capacity to overcome the effects of an external crisis.

On December 17, 2015, the new Government administration, which took office in December 2015, implemented certain measures including the lifting of certain foreign exchange controls. As a result, the official exchange rate published by Banco Nación increased from Ps. 9.83 per U.S. dollar on December 16, 2015 to Ps. 13.95 per U.S. dollar on December 18, 2015.

It is expected that with the new exchange regime, the value of the Argentine Government increasedpeso could freely fluctuate against the official peso/dollar exchange rate by 31.1%. WeU.S. dollar. Therefore, we are unable to predict the future value of the peso against the U.S. dollar and how any fluctuations may affect the costs that we incur in conducting our operations. See “Item 10. Additional Information – Information—D. Exchange Controls.” Further, depreciation of the peso against the U.S. dollar would likely result in a material adverse effect on our business as a result of our exposure to financial debt in U.S. dollars. As of March 31, 2015,2016, the total amount of principal and accrued but unpaid interest under our consolidated U.S. dollar-denominated indebtedness was US$296.9262.0 million.

In addition, the Government has also adopted numerous measures to control directly or indirectly foreign trade and foreign exchange markets. Since the enhancement of exchange controls began in late

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2011, and uponIn addition, in the introduction ofpast the Government has also adopted numerous measures that have limitedto directly or indirectly control the access to foreign currency by private companies and individuals in addition to requiring an authorization of tax authorities to access the foreign currencytrade and foreign exchange market, the implied exchange rate, as reflected in the quotations for Argentine securities that trade in foreign markets compared to the corresponding quotations in the local market, has increased significantly.markets. These regulations may preventprevented or limitlimited us from offsetting the risk derived from our exposure to the U.S. dollar and, if so,dollar.

Even though these measures had the positive effect of lifting certain exchange controls in Argentina, we cannot predict the impact of these changes on our financial condition and results of operations.  

We cannot provide any assurance that we will be able to access foreign exchange markets or that these measures will not cause fluctuations in the value of the peso and/orpeso. The lifting of certain exchange controls and other future economic, social and political developments in Argentina, over which we have no control, will notmay adversely affect our financial condition or results of operations, including our ability to pay our debts at maturity or dividends. For additional information on developments relating to exchange controls, see “Item 10 – Additional Information—D. Exchange Controls.”

Government intervention in the Argentine economy could adversely affect our results of operations or financial condition.

In addition to the political and economic factors described above, our business and operations have been, are and could in the future be, affected by actions taken by the Government through the implementation of new or amended laws and regulations, such as: nationalizations, expropriations or forced divestiture of assets; restrictions on production, imports and exports; exchange and/or transfer restrictions, including those relating to dividend payments; direct and indirect price controls; tax increases, changes in the interpretation or application of tax laws and other retroactive tax claims or challenges; cancellation of contractual rights; and delays or denials of governmental approvals.

During recent years, the Government has increased its direct intervention in the Argentine economy, including through the implementation of expropriation and nationalization measures, price controls and exchange controls.

In 2008, the Government absorbed and replaced the former private pension system with a public “pay as you go” pension system. As a result, all resources administered by the private pension funds, including significant equity interests in a wide range of listed companies, were transferred to a separate fund (“Fondo de Garantía de Sustentabilidad” or the“FGS”) to be administered by theAdministración Nacional de la SeguridadSocial (the(“ANSES”). The dissolution of the private pension funds and the transfer of their financial assets to the FGS have had important repercussions on the financing of private sector companies. Purchases of debt and equity instruments which previously could be placed with pension fund administrators are now entirely subject to the discretion of the ANSES. In addition, since acquiring equity interests in privately owned companies through the process of replacing the pension system, the ANSES has been entitled to designate government representatives to the boards of directors of those entities.these companies. Pursuant to Decree No. 1,278/12, ondated July 25, 2012, theseANSES representatives are tomust report directly to theMinisterio de EconomíaHacienda y Finanzas Públicas(“MEFMHF”) and are subject to a mandatory information-sharing regime, under which, among other obligations, they must immediately inform the MEFMHF of the agenda for each board of directors meeting and provide related documentation.

In May 2012, the Argentine Congress passed Law No. 26,741, which declared hydrocarbons self-sufficiency, production, industrialization, transport and marketing to be activities of public interest and primary goals of Argentina, and empowered the Government to take the necessary measures to achieve such goals andgoals. Law No. 26,741 expropriated 51% of the shares of YPF S.A. (“YPF”), formerly known as Repsol YPF S.A. (“Repsol YPF”). On February 25, 2014, the board of Repsol S.A., controlling entity of Repsol YPF, board approved a compensation package offered by the Government of the equivalent of US$ 5 billion in Argentine bonds for the expropriation. As of February 28, 2014 YPF market capitalization was US$ 10.6 billion.

Our business and operations in Argentina may also be adversely affected by measures adopted by the Government to address inflation.inflation and sustainable growth. For example, increases in the costs of services and labor could negatively affect our results of operations if we are not permitted to pass those costs along to customers in the tariffs, which we charge due to the imposition of price controls. See “—Risks Relating to Our Business—Since the implementation of As our License is subject to renegotiation pursuant to the Public Emergency Law, in 2002 and until March 31, 2014, we had received only one increasefailure or delay to negotiate further improvements to our tariff structure, and/or to have our tariffs adjusted to reflect increases in our regulated gas tariffs, which was granted on April 1, 2014, whichcosts in a timely manner or at all, has adversely affected our gas transportation segmentfinancial condition and net revenues thereof.results of operations and could also have a material adverse effect on them.”

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In addition, on October 26, 2011in the Argentine Executive Branchpast the Government issued Decree No. 1,722/11, providing thatseveral measures to intervene in the foreign exchange market, such as restricting its free access and imposing the obligation to repatriate and sell within the local foreign exchange market all foreign currency revenues obtained from exports made by miningexports.

In October 2015, presidential, congressional, municipal and oil and natural gas companies must be repatriated and sold withinstate government elections were held. Candidate Mauricio Macri won the local foreign exchange market, which isArgentina presidency, beginning his presidential term on December 10, 2015. Mr. Macri’s victory for Argentina’s center-right opposition ended the general regime applicable to revenues generated by Argentine exports. Prior to the issuance of this decree, we were allowed to retain overseas up to 70%12-year rule of the proceedsPeronist Party.

A scenario of mostlow growth and high inflation rates is highly likely going forward, as a result of the accumulation of macroeconomic imbalances over recent years, the actions of the Government in regulatory matters and deterioration in some variables in the international context. We can offer no assurance that policies  implemented by the Government will not adversely affect our exportsbusiness, results of Liquids. See “Item 10. Additional Information— D. Exchange Controls.”operations and financial position.

Argentina is an emerging market economy which economythat is highly sensitive to local political developments which have had an adverse impact on the level of investment in Argentina and the access of Argentine companies to the international capital markets. Future developments may adversely affect Argentina’s economy and, in turn, our business, results of operations and financial condition.

The Argentine economy can be adversely affected by economic developments in other markets and by more general “contagion” effects, which could have a material adverse effect on Argentina’s economic growth.

Argentina’s economy is vulnerable to external shocks that could be caused by adverse developments affecting its principal trading partners. A significant decline in the economic growth of any of Argentina’s major trading partners could have a material adverse impact on Argentina’s balance of trade and adversely affect Argentina’s economic growth. For example, recent economic slowdowns, especially in Argentina’s major trading partners, led to declines in Argentine exports in the last twofew years. Specifically, fluctuations in the price of the commodities sold by Argentina and a significant revaluation of the peso against the U.S. dollar could harm Argentina’s competitiveness and affect its exports.

In addition, financial and securities markets in Argentina are influenced by economic and market conditions in other markets worldwide.

As a consequence of China’s economic slowdown, U.S. monetary policy has significant effects on capital inflows and asset price movements in emerging market economies. Increases in U.S. interest rates result in the appreciation of the U.S. dollar and the decrease in prices for raw materials, especially those exported by emerging economies that depend on them.

Argentina is also affected by economic conditions of its main partners, which during 2015 have devaluated their currencies. In February 2015, the Central Bank of Brazil started a devaluation process of its currency, the Real, which suffered devaluation of approximately 46% against the U.S. dollar. Additionally, it is worth noting the slowdown in China's growth and the reduction in exports to this Asian country, which caused an oversupply of commodities, such as oil and natural gas, beginningand a consequent fall in the last quarterprices of 2014, global commodity prices have declined sharply.raw materials. Decreases in exports have a material adverse effect on Argentina’s public finances due to a loss of tax on exports, causing an imbalance in the country’s exchange market.

Although economic conditions vary from country to country, investors’ perceptions of events occurring in other countries have in the past substantially affected, and may continue to substantially affect, capital flows into and investments in securities from issuers in other countries, including Argentina. International investors’ reactions to events occurring in one market sometimes demonstrate a “contagion” effect in which an entire region or class of investment is disfavored by international investors. Argentina could be adversely affected by negative economic or financial developments in other countries, which in turn may have an adverse effect on our financial condition and results of operations.

The impact of global economies on Argentina has led to a reduction in exports and foreign direct investments, to a decline in national tax revenues and to the inability to access international capital markets. There can be no assurance that the Argentine financial system and securities markets will not be adversely affected by events in developed countries’ economies or events in other emerging markets. A slowdown in

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economic activity in Argentina would adversely affect our business, financial condition and results of operations.

Argentina’s past default and ongoing litigationlitigations with holdout bondholders may limit our ability to access international markets.

The ability of Argentine companies to access international financial markets is currently very limited and the conditions and cost of such financing are onerous if any such financing is available.

Argentina’s past default and ongoing litigation with bondholders who held out from past exchange offers may limit our ability to access international markets. Following the default on its external debt in 2001, the government of Argentina sought to restructure its outstanding debt by offering holders of the defaulted bonds two opportunities to exchange them for newly issued debt securities, in 2005 and again in 2010. Holders of approximately 93% of Argentina’s defaulted debt participated in the exchanges.

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“me too” plaintiffs’ actions, it would grant a motion to vacate the injunctions in all cases. The Court of Appeals remanded Argentina’s pending appeals, and the District Court entered an order on March 2 stating that the injunctions would be lifted upon the satisfaction of two conditions: first, that the Argentine Congress repeal the so-called Lock Law and Sovereign Payment Law, which prohibit the Government from paying bondholders that did not participate in the 2005 which expire in 2015 (Boden 2015) ator 2010 exchanges, and second, that the Government pay the settlement amounts owed to any holdout creditor that entered into a discount to parsettlement agreement by February 29, 2016.

The plaintiffs appealed the District Court’s March 2 decision the following day. On April 13, 2016, the Court of Appeals heard oral argument and, to sell dollar-denominated securitiesfollowing the argument, the Court announced from the bench that it was affirming the District Court’s March 2 order, paving the way for the injunctions to be lifted once the conditions set forth by the District Court are satisfied. The Court of Appeals issued a written decision to that effect on April 15, 2016.

Finally, on March 31, 2016, the National Congress voted to repeal laws that prevent Argentina from paying the holdouts. On April 12, the District Court found that this action by the National Congress satisfied the first condition for lifting the injunctions, meaning that only the second condition—payment to holdout creditors that entered into settlement agreements by February 29—remained to be satisfied. Following the Court of Appeals’ decision on April 13, Argentina announced that it would proceed with an expiration datea new bond offering of up to U.S. dollars 12.5 billion to repay the holdouts. After the issuance of U.S. dollars 16.5 billion of new bonds to international investors, on April 22, 2016 Argentina notified the District Court that it had made full payment under the settlement agreements with the holdout creditors. On the same day, the District Court vacated the injunctions in May 2024 (Bonar 2024s). This offering resulted in a transaction,all cases

However, if Argentina does not fully recover its ability to fluidly access to international capital markets and attract foreign direct investment, there is risk that the country will not get the capital needed to restart the investment cycle and achieve sustainable rates of economic growth. Argentina’s fiscal condition could be adversely affected, which yielded approximately U.S 200 million in Boden 2015, boughtcould lead to more inflation and approximately U.S. 300 million in Bonar sold. Asundermine the government’s ability to implement economic policies designed to promote growth. The difficulty of the date of this Annual Report, negotiations between the holdouts and the Government have not shown significant progress.

These lawsuitssustaining over time economic growth with reasonable price stability could result in the freezinga renewed episode of assets or other precautionary measures on assets of Argentina. Furthermore, Argentina’s inability to restructure its sovereign debt could reduce its access to international financial markets. These circumstances may have a materially adverse effect on the economy of Argentina and affect our ability to access international financing or repay our debts.economic instability.

In addition, Argentina’spast default in 20022001 and itsyears of ongoing litigation with holdout creditors may continue toreappear in the future and prevent Argentine companies such as us from accessing the international capital markets readily or render the financial conditions of such access significantly more onerous than for companies in other countries in the region, and may therefore negatively affect our financial condition or cash flows.

The ability of most Argentine companies to access international financial markets is currently limited and the conditions and cost of such financing are onerous if any such financing is available.

In addition, the foreign shareholders of several Argentine companies (including ours)us), together with public utilities and certain bondholders that did not participate in the exchange offers described above, filed claims in excess of US$15 billion with the International Centre for Settlement of Investment Disputes (the(“ICSID”), alleging that the emergency measures adopted by the Government in 2002 do not meet the just and equal treatment requirements of several bilateral investment treaties to which Argentina is a party. While certain plaintiffs have prevailed against Argentina in their ICSID proceedings, including British Gas, whose US$ 185 million award was upheld by the United States Supreme Court, and GDF Suez, which was awarded US$ 405 million. Argentina has not yet honored such awards. Recently in April 2015, the ICSID issued an award in favor of GDF Suez for a total amount of US$ 405 million. However,awards, although in October 2013, Argentina agreed to compensate five claimants that had obtained favorable decisions from the ICSID. These agreements were performed afterThe compensation was paid in the deliveryform of sovereign bonds.

The developments described above, the global economic crisis that started in the fourth quarter of 2008, and the resulting international stock market crash and the insolvency of major financial institutions toward the end of 2008, have generally limited the ability of Argentine companies to access international

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Recently approved Argentine judicial, commercial and civil reforms, as well as challenges thereto, have generated uncertainty with respect to future administrative and judicial proceedings, including those involving the Government.

Law No. 26,854, which regulates injunctions in cases in which the Government is a party or has intervened, was promulgated on April 30, 2013 as part of a judicial reform bill approved by the Argentine Congress. One of the relevant changes included in the judicial reform bill is a time limitation on injunctions imposed in proceedings brought against the Government. Legal challenges to the law have resulted in rulings which for the time being have declared the law unconstitutional. If the law is ultimately upheld our ability in the future to pursue claims against the Government could be adversely affected.

On October 1, 2014, the Argentine Congress passed Law No. 26,994, which approved the new Argentine Civil and Commercial Code, abrogated several laws and modified others, including the General Companies Law and the Consumer Protection Law. The new Civil and Commercial Code, which will comecame into effect inon August 1, 2015, introducesintroduced significant changes to the Argentine private law system.

Although this reform substantially reflects numerous judicial precedents and introduces certain changes it is not possible to predict the degree to which it might affect current or future contracts and/or administrative and/or judicial proceedings to which TGS iswe are or will be a party.

Risks Relating to Our Business

Because we receive a significant portion of our net revenues from public service contracts, which tariffs are no longer stated in dollars or subject to indexing, our net revenues and liquidity have been harmed as a result of inflation and the devaluation of the peso.

All of our net revenues from our gas transportation segment (which represented 17.3%24.0% and 23.1%17.3% of total net revenues during 20142015 and 2013,2014, respectively) are attributable to public service contracts, which are subject to Government regulation. We entered into these public service contracts primarily with natural gas distribution companies in connection with the privatization of Gas del Estado S.E. (“GdE”) in 1992 pursuant to Law 24,076 and Executive Branch Decrees No. 1,189/92 and 1,738/92. Prior to the passage of the Public Emergency Law, our tariffs were stated in U.S. dollars and subject to indexing, based on semi-annual changes in the U.S. Producer Price Index (“PPI”), with adjustments every five years, based on the efficiency of, and investments in, our gas transportation operations. The Public Emergency Law, however, eliminated tariff indexation. In accordance with the Public Emergency Law, in January 2002, public service tariffs were converted into pesos and fixed at an exchange rate of Ps. l.00 = US$l.00 even as the peso was allowed to devalue against the U.S. dollar.

SinceConsistent inflation in Argentina since 2002, Argentina has experienced significant inflation, which has adversely affected our business and results of operations. Continued inflation, without any corresponding increase in our natural gas transportation tariffs, has adversely affected and would continue to adversely affect our natural gas transportation revenues, net revenues and financial condition.

In addition, since 2002, the peso has fluctuated in value, which has adversely affected our results and financial position. In particular, substantially all of our debt is denominated in U.S. dollars and

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Little progress has been made to date in our renegotiation process with UNIREN for remuneration under the License (the“Renegotiation Process”). Since 2003, multiple proposals from UNIREN, with varying levels of tariff increase, have been discussed with our management. On October 9, 2008, we signed an agreement with UNIREN regarding the renegotiation of our License that contemplated a transitional tariff increase of 20%, which would be retroactively applicable to September 1, 2008 (the“2008 Transitional Agreement”). According to the 2008 Transitional Agreement, the funds generatedThis agreement was ratified by this tariff increase would be temporarily deposited in a trust fund until we needed them to carry out an investment plan for improvements in our pipeline system. Although the tariff increase has not been granted until April 2014, we timely executed the investment plan called for under the 2008 Transitional Agreement using our own funds.

On December 3, 2009, the Executive Branch ratified the 2008 Transitional Agreement through thePresidential Decree No. 1,918/09. By means of this decree, we will be able to bill the tariff increase to our clients as soon as ENARGAS publishes the new tariff schedule and sets the methodology to bill the retroactive effect. However, ENARGAS has not carried out these duties to date.

Because of this delay, in August 2010, we requested from ENARGAS authorization to issue the tariff schedule, including the 20% transitory tariff increase and the retroactive collection methodology, and application of an interest rate in line with the established method of payment. ENARGAS responded that they had submitted the records and the tariff project to the Coordination and Management Control Under-Secretariat (“SCyCG”), which is under the scope of MPFIPyS, based on Resolution No. 2000/2005 of MPFIPyS.

On September 30, 2010, we filed anacción de amparo (a legal action to guarantee constitutional rights) against ENARGAS and SCyCG in order to obtain the implementation of the new tariff increase schedule. On November 8, 2010, we were served notice of a judgment that upheld theacción de amparo filed by us. Said judgment ordered SCyCG to return to ENARGAS, within a two-day period, the documents remitted by ENARGASin connection with the tariff schedule applicable to us under Decree No. 1,918/09; and ordered ENARGAS, within two days following reception of said documents, to set the tariff schedule and the retroactive collection methodology. On November 12, 2010, ENARGAS and SCyCG filed an appeal against this judgment.

Moreover, on November 16, 2010, we received a proposal from UNIREN, which provides that in order to move forward with the renegotiation of the License within the scope and in the terms of the Public Emergency Law, all claims, appeals, or administrative or judicial action taken against the Government in connection with or arising from the Renegotiation Process must be suspended. In response, on November 18, 2010, we requested the suspension of theacción de amparo mentioned above for a twenty-working-day period, which is automatically renewable at the end of such period unless our Board, before or at the expiration of each period, decides not to renew it, in order to move forward with the renegotiation of the License. On December 28, 2010, we requested ENARGAS and MPFIPyS to join our request to suspend theacción de amparo, and as of the date of this Annual Report, we have not received any favorable response on this matter. See also “—Our present and former shareholders are party to ongoing legal proceedings against the Government arising from the effects of the Public Emergency Law. As a result of the renegotiation of our License, our present and former shareholders may deem it convenient to abandon such claims.”

On April 5, 2011, the Second Chamber of the Court of Appeals in administrative federal matters in the City of Buenos Aires set a 60 business day term for SCyCG to act according to the provisions of Resolution No. 2000/2005 and return to ENARGAS the documents remitted by ENARGAS in connection

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Our results of operations may be adversely affected because our License is subject to renegotiation pursuant to the Public Emergency Law.

The Public Emergency Law authorized the Government to renegotiate public service contracts, tariffs and licenses with public utility companies using the following criteria:

·

the impact of the rates on the competitiveness of the economy and on national income distribution;

·

the quality of the services and the investment programs contractually provided for in the public service contract;

·

the interests of users, as well as service access conditions;

·

the operational safety of the systems concerned; and

·

the profitability of the respective company.

The deadline for the renegotiation of the public works and utilities contracts has been extended until December 31, 2015. As part of this Renegotiation Process, the terms of our License may be changed materially. See “—Our regulated business is dependent on our ability to maintain our License, which is subject to revocation under some circumstances.”

Since the enactment of the Public Emergency Law, there has not been significant progress with respect to the renegotiation of our public service contract with UNIREN. According to the 2008 Transitional Agreement, we should reach an agreement with UNIREN on the terms and conditions of the overall renegotiation before December 31, 2015 pursuant to the Public Emergency Law, as amended. If we do not reach this agreement, then UNIREN would inform the Executive Branch and provide it with recommendations for the procedural steps to follow.

In this regard, in October 2008, we also received an integral license renegotiation agreement proposal from UNIREN (which includes the initial 20% tariff increase). In October 2011, we received a new proposal from UNIREN (the“Renegotiation Agreement”) which included similar terms and conditions to the ones included in the last proposal, the 2008 Transitional Agreement. Our Board of Directors approved the Renegotiation Agreement, which was initiated by us, allowing UNIREN to initiate the administrative procedure for finalizing the Renegotiation Agreement; however, as of the date of this Annual Report, the Renegotiation Agreement, other than the initial 20% tariff increase, is still not effective. The Renegotiation Agreement is expected to be finalized and signed by UNIREN after the approval of the relevant regulatory agencies, including, among others: the Federal Energy Bureau, MPFIPyS, MEF, the Federal Congress, and the Executive Branch.

In spite of the above-mentioned 2008 Transitional Agreement, partially implemented on April 7, 2014, and the Renegotiation Agreement that have been proposed and agreed to by us, we cannot at this time provide any assurances with regard to the terms or the timing of any renegotiation of our License, including any resulting increase in tariffs. Even if our License is renegotiated on more favorable terms, those terms nonetheless may be insufficient to avoid a material adverse effect on our results of operations and financial condition. See “Item 4. Our Information—B. Business Overview—Natural Gas Transportation—Regulatory Framework—Adjustment of Rates”Tariffs” below for more information.

An inability to reach an agreement on the renegotiation of our License or any failure of the Government to comply with the terms of the renegotiated License, when agreed, could materially adversely affect the profitability of our gas transportation business segment.

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Other similarly situated public utility companies have complied with the requirements made by UNIREN requirement to abandon legal claims against the Government as part of their Renegotiation Process. Some of these companies have been able to sign agreements with UNIREN that contemplate, among other things, an initial tariff increase and a tariff adjustment scheme for the future. However, even for these companies, the process for future tariff increases has been significantly delayed. Even if our present and former shareholders

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·

delegation of the functions granted in such contract without the prior authorization of ENARGAS, or the termination of such agreement without regulatory approval of a new contract.

If our License were revoked, we would be required to cease providing natural gas transportation services. The impact of a loss of our License on our business, financial condition and results of operations would be material and adverse.

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economy generally. With respect to the natural gas industry, these strategies, measures and programs include, among others, the expansion of our pipeline, through the creation of financial trust funds used as vehicles to facilitate financing of those investments (“Gas Trusts”). In order to finance suchFor more information on the pipeline expansions, Law No. 26,095 was passed to provide for the creation of additional tariff surcharges (“cargos específicos”),

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NaturalDespite having increased in recent years, natural gas arriving from the Neuquina basin has declined in volume since 2009. Our Liquids production depends on the natural gas that arrives at the Cerri Complex through three main pipelines from the Neuquina and Austral natural gas basins. The flow and caloric power of this natural gas are subject to risks that could materially adversely affect our Liquids and midstream business segment.

Argentina relies heavily on natural gas. However, its natural gas reserves are declining. There is some risk that natural gas production will continue to decrease in the future and that new exploration will not compensate for such decline, which would adversely affect our Liquids business segment by reducing the amount of natural gas flowing to the Cerri Complex and, therefore, the amount of Liquids we produce. In addition, the reduction in the production of natural gas could affect the flow of natural gas provided for our midstream clients for its compression and treatment.

44.9%In 2015, 41.5% of the natural gas transported by our system in 2014 originated in the Neuquina basin with the remainder coming primarily from the Austral basin. Since 2009, the quality and the volume of natural gas injected from the Neuquina basin has been lower (as a consequence of the reduction of natural gas production in this basin) and not appropriate for processing in the Cerri Complex, negatively impacting our level of output from this facility. As a consequence of this lower output of natural gas from the Neuquina basin, we have had to buy natural gas at higher prices causing an increase in the cost of Liquids production and commercialization activities for our own account that reduces our profit from these activities.

Since the construction of a natural gas processing plant upstream of the Cerri Complex by Compañía MEGA S.A. (“MEGA”), asociedad anónima owned by YPF, Petrobras International Braspetro B.V. and Dow Investment Argentina S.A the volumes of natural gas arrived to the Cerri Complex have been reduced. There can be no assurance that there will not be further reductions in the future. Any reduction of natural gas volumes arriving at the the Cerri Complex for Liquids could adversely affect our revenues from Liquids production and commercialization services and consequently, our net revenues.

In 2009, non-conventional natural gas was discovered in the Neuquina basin by YPF, which at that time was a subsidiary of Repsol S.A. ThisExploration and exploitation of this natural gas reserve is atstill in the beginning stages, of its exploration and exploitation, which will require several years and involve high extraction costs. Since the expropriation of YPF in 2012, the Government has played an important role signing agreements with foreign and local oil companies in order to develop an investment plan, which allows for the increase of the reserves of this basin. As a consequence of the measures taken by the Government to ensure production levels, during 2014,2015, natural gas production in 2014 has shown the lowest reduction of the past 10 years (approximately 0.5%increased approximately 3.6% compared with 2013 production).2014 production.

We cannot assure you, however, that this new natural gas reserve at the Neuquina basin, or any other measures taken by the Government to increase natural gas production and supplies, will be successful in increasing Argentine natural gas reserves, or the extent to which our midstream or Liquids production and commercialization businesses could be adversely affected by a sustained decrease in the production of natural gas.

Increased competition in the Liquids business could adversely affect our net revenues.

Since 2002, our Liquids business has represented an increasingly substantial proportion of our business, measured in terms of revenues. In 2014, 75.4% of our net revenues were from our Liquids production and commercialization segment.

In 2000, a natural gas processing plant was built upstream of the Cerri Complex by Compañía MEGA S.A. (“MEGA”), asociedad anónima owned by YPF, Petrobras International Braspetro B.V. and Dow Investment Argentina S.A. Any resulting lower volumes of natural gas arriving at the Cerri Complex for Liquids processing as a result of the activities of this natural gas processing plant, or any other project

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If we are unable to purchase natural gas from other sources, the volume of our Liquids productions may decrease.

Additionally, in 2013, the ENARGAS issued Note No. 04624/4,624/2013, which regulated peak natural gas prices for industrial users and increased the price at which we purchase natural gas to be processed in the Cerri Complex. For further information see, “Item 4 – Our informationInformation – Business overviewOverview – Liquids productionProduction and commercialization.Commercialization.” Any additional increase in the costs of our Liquids production and commercialization segment, or decrease in the volume of Liquids processed may adversely affect our revenues, business and results of operations.

Although our Liquids production and commercialization activities are not subject to regulation by ENARGAS, the Government has taken certain regulatory actions in recent years that have affected our Liquids business. For example, in April 2005, the Government enacted Law No. 26,020 which set the framework by which the Federal Energy Bureau establishes regulations over LPG suppliers to guarantee supply and price stability of LPG products in the domestic market. Through Decree No. 2,067/08, the Executive Branch created a charge to be paid by (i) the users of regulated services of transportation and / or distribution, (ii) natural gas consumers receiving natural gas directly from producers without making use of transportation systems or natural gas distribution, (iii) the natural gas processing companies in order to finance the import of natural gas (the“natural gas processing charge”Natural Gas Processing Charge”). The payment of the natural gas processing charge was selectively subsidized from 2008 according to the destination of the natural gas benefitingbenefitting low income residential users. In November 2011, however, ENARGAS issued Resolution No. 1,982/11 and 1,991/11 (the“Gas Charge Resolutions”) which modified the list of the subsidy beneficiaries, and thus, involvedresulted in a cost increase for many of our clients and for us (specifically for the consumption of natural gas for our own account). The natural gas processing charge increased from Ps. 0.049 to Ps. 0.405 per cubic meter of natural gas effective from December 1, 2011, representing a significant increase in our variable costs of natural gas processing.

In response, in order to avoid an adverse effect on our Liquids business, as a result of the implementation of the Gas Charge Resolutions, we initiated legal proceedings against the Decree No. 2,067/08 and the Gas Charge Resolutions, including the Government, ENARGAS and MPFIPyS as defendants. “For additional information see, Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal and Regulatory Proceedings—Tax Claims.”

On July 10, 2012, we obtained fromMarch 28, 2016, the Lower Court in administrative federal matters based inMinistry of Energy issued Resolution No. 28/2016, which instructs the Autonomous City of Buenos Aires, a preliminary injunction that provides that we are exempt fromENARGAS to take all the billing andnecessary measures to reduce to zero the payment of the natural gas processing charge increase under theNatural Gas Processing Charge Resolutions, pending the final resolution of the proceedings. This decision was confirmed onsince April 7, 2014 by the relevant Court of Appeals, but only for a period of six months. We appealed this decision before the Supreme Court of Justice to challenge the limited duration of the Court of Appeals order. Most recently, we requested and obtained a new preliminary injunction, which will expire on September 2015. However, we cannot assure you that this dispute will be resolved in our favor, or that amounts payable under the natural

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At the end of 2014 and the beginning of 2015, to reduce the impact of the sharp decrease in the international reference prices for LPG and Natural Gasoline, the Government reduced to 1% the applicable rate of withholding tax for exports, maintaining the “sliding-scale” regime in case international prices were higher than a certain level set by the Federal Energy Bureau. During the whole year ended 2015, the applicable tax rate remained at its minimum.

Furthermore, in the domestic market, since September 2008, the Federal Energy Bureau and LPG producers, among others, signed an agreement on the price stabilization of the butane bottles whereby the industry players committed to a substantial reduction in the price of butane bottles (the“Stabilization Agreement”). Because theStabilization Agreement requires us to produce and market LPG volumes required by the Federal Energy Bureau at prices significantly below the market, we are unable to cover LPG production costs, leading to a negative operating margin. On March 30, 2015, the Executive Branch enacted Decree No. 470/2015, which was regulated by Resolution No. 39/2015 issued by the Federal Energy Bureau. The decree and the resolution mentioned above modifymodified the framework applied forapplicable to the sale of LPG bottles.bottles pursuant Decree No. 470/2015.

In December 2014 and February 2015, the MEF modified the rates applicable for the export of natural gasoline and propane and butane. After the enactment of these modifications, the minimum tax rate is 1%. This is the rate in effect given the low price environment.

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Considering the diminishing supply of natural gas from the Neuquina basin, we cannot assure you that the natural gas transportation contracts that expire in the short term will be renewed. In addition, after the issuance of Resolution No. 95/2013, which empowers the Federal Energy Bureau to set a defined price for the purchase of energy by the Federal Energy Bureau from power plants, and to manage the supply of natural gas to power plants, it is possible that our power plant customers will not renew their natural gas firm transportation contracts with us, because the power plant could be unable to recognize the cost of purchasing gas from us as a cost to providing energy under the new regulations. For these reasons, weWe cannot assure you that our natural gas firm transportation contracts will be renewed in whole or in part in the existing routes or by the current customers. We may not to renew some natural gas transportation contracts in light of the diminishing supply of natural gas from the Neuquina basin. In addition, after the issuance of Resolution No. 95/2013 of the Federal Energy Bureau, our power plant customers may be unable to recognize the cost of purchasing gas from us as a cost to producing energy, and therefore may choose not to renew their natural gas firm transportation contracts. If we are unable to renew the majority of our natural gas firm transportation contracts as they mature, our revenues, business and results of operation could be adversely affected.

The affirmative and restrictive covenants in our currently outstanding indebtedness could adversely restrict our financial and operating flexibility and subject us to other risks.

The terms of our currently outstanding indebtedness provide for numerous affirmative and restrictive covenants that limit our ability to, among other things, create liens, incur additional debt, pay dividends, acquire shares of stock and make payments on subordinated debt, enter into transactions with affiliates, sell assets, or consolidate, merge or sell substantially all of our assets.

These restrictions may limit our ability to operate our businesses and may prohibit or limit our ability to enhance our operations or take advantage of potential business opportunities as they arise. The breach of any of these covenants by us or the failure by us 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 and the renegotiation of public works and licenses process. In addition, if we are unable to generate sufficient cash flow from operations, we may be required to refinance outstanding debt or to obtain additional financing. We cannot assure you that a refinancing would be possible or that any additional financing would be available or obtained on acceptable terms.

Our insurance policies may not fully cover damage or we may not be able to obtain insurance against certain risks.

As of December 31, 2014,2015, our physical assets are insured for up to US$ 2,2152,257 million subject to certain deductibles. We maintain insurance policies intended to mitigate our losses due to customary risks. These policies cover our assets against loss for physical damage, loss of revenue and also third party liability. However, we cannot assure you that the scope of damages suffered in the event of a natural disaster or catastrophic event would not exceed the policy limits of our insurance coverage. We maintain all-risk physical damage coverage for losses resulting from, but not limited to, earthquakes, fire, explosions, floods, windstorms, strikes, riots, mechanical breakdowns and business interruption. Our level of insurance may not be sufficient to fully cover all losses that may arise in the course of our business or insurance covering our various risks may not continue to be available in the future. In addition, we may not be able to obtain insurance on comparable terms in the future. We may be materially and adversely affected if we incur losses that are not fully covered by our insurance policies or if we are required to disburse significant amounts from our own funds to cover such losses.

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 employees, we rely on a number of third party service providers to outsource certain services. We follow very strict policies to control the compliance by such third party service 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 service providers have significantly increased. As a result of the foregoing, potential severance payment liabilities have significantly increased and, in the event any third party service 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 service provider to hold us liable for the payment of any labor and social security obligations defaulted by any such

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We may be exposed to risks related to litigation and administrative proceedings that could materially and adversely affect our business and financial performance in the event of an unfavorable ruling.

Our business may expose us to litigation relating to labor, environmental, health and safety matters, regulatory, tax and administrative proceedings, governmental investigations, tort claims and contract disputes and criminal prosecution, among other matters. In the context of these proceedings we may not only be required to pay fines or money damages but also may be subject to complementary sanctions or injunctions affecting our ability to continue our operations. While we may contest these matters vigorously and make insurance claims when appropriate, litigation and other proceedings are inherently costly and unpredictable, making it difficult to accurately estimate the outcome of actual or potential litigation or proceedings. Although we may establish provisions as we deem necessary, the amounts that we reserve could vary significantly from any amounts we actually pay due to the inherent uncertainties in the estimation process.

Risks Relating to Our Shares and ADRs

Shareholders outside Argentina may face additional investment risk from currency exchange rate fluctuations in connection with their holding of our shares or American Depositary Receipts (“ADRs”). Exchange controls imposed by the Argentine Government may limit our ability to make payments to the Depositary in U.S. dollars, and thereby limit ADR holders’ ability to receive cash dividends in U.S. dollars.

We are an Argentine company and any future payments of dividends on our shares will be denominated in pesos. The peso has historically fluctuated significantly against many major world currencies, including the U.S. dollar. A depreciation of the peso would likely adversely affect the U.S. dollar or other currency equivalent of any dividends paid on our shares and could result in a decline in the value of our shares and ADSs as measured in U.S. dollars.

Since 2011, Argentine companies are required to obtain prior approval from BCRA and Argentine tax authorities in order to engage in certain foreign exchange transactions. Thus, our shareholders’ ability to receive cash dividends in U.S. dollars may be limited by the ability of the Depositary for our ADR program to convert cash dividends paid in Pesos into U.S. dollars. Under the terms of our deposit agreement for the ADRs, to the extent that the Depositary can in its judgment, and in accordance with local exchange regulations, convert Pesos (or any other foreign currency) into U.S. dollars on a reasonable basis and transfer the resulting U.S. dollars abroad, the Depositary will as promptly as practicable convert or cause to be converted all cash dividends received by it in Pesos on the deposited securities into U.S. dollars. If in the judgment of the Depositary this conversion is not possible on a reasonable basis (or is not permitted by applicable Argentine laws, regulations and approval requirements), the Depositary may distribute the pesos received or in its discretion hold such currency uninvested without liability for interest thereon for the respective accounts of the owners entitled to receive the same. As a result, if the exchange rate fluctuates significantly during a time when the depositary cannot convert the foreign currency, you may lose some of the value of the dividend distribution.

PrincipalOur principal shareholders exercise significant control over matters affecting us, and may have interests that differ from those of our other shareholders.

As of the date of issuance of this Annual Report, our controlling shareholder, CIESA owns 51% of our total common shares, represented by Class A common shares. CIESA is a party to a Shareholders’ Agreement,shareholders’ agreement, together with Petrobras Argentina S.A. (“Petrobras Argentina”), Petrobras Hispano Argentina S.A. (together, the“Petrobras Argentina Group”), the CIESA Trust (whose trustee is The Royal Bank of Scotland N.V. Sucursal Argentina) (the“Trust”), and Pampa.Pampa (the“Shareholders’ Agreement”). This Shareholders’ Agreement governs certain matters relating to shareholder participation in CIESA and in us. As a resultBecause of its significant shareholding and contractual obligations, CIESA is in a position to direct our management, to control the election of a majority of the Board of Directors, to determine our dividend and other policies and to generally determine the outcome of any matter put to a vote of our shareholders.

On March 2, 2016, Pampa disclosed its agreement with Petroleo Brasileiro S.A. (“Petrobras”) to a 30-day exclusivity period, which could be extended for another 30 days, to continue the negotiations for the acquisition of Petrobras’s capital and voting stocks in Petrobras Argentina. On April 8, 2016, Pampa

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disclosed that negotiations with Petrobras for the sale of the controlling share in Petrobras Argentina would continue for another 30 days period of exclusivity.

In each of its press releases related to the potential sale of its controlling interest, Petrobras has stated that any such transaction’s terms and conditions would be subject to approval by its executive board and its board of directors, as well as by the relevant regulatory entities.

In addition, on March 9, 2016, Pampa disclosed that, as part of its ongoing evaluation of its corporate strategy, and taking into consideration the negotiations to acquire Petrobras Argentina, its board of directors had approved the commencement of negotiations for the sale of its indirect stake in us. On April 22, 2016, Pampa disclosed that it had agreed to a 45-day exclusivity period with Harz Energy, a subsidiary of Grupo Neuss, in order to negotiate the sale of Pampa’s ownership of, and any direct or indirect rights that it has in TGS.

We cannot assure you that the interests of our principal shareholders will not diverge from interests of our other investors. See “Item 7. Major Shareholders and related party transactions.”

Sales of a substantial number of shares could decrease the market prices of our shares and the ADSs

CIESA holds the 51% of our Class A shares. Pursuant to thePliego de Bases y Condiciones para la Privatización de Gas del Estado S.E.(the(the“Pliego”) and the terms of the 2007 and 2014 Notes, CIESA may not reduce its shareholding below 51% of our share capital without the competent authorities’ approval. The market prices of our common shares and ADS could decline as a result of sales by our existing shareholders, such as the ANSES, or of any other significant shareholder of common shares or ADSs in the market, or the perception that these sales could occur.

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

Our corporate affairs are governed by our By-laws, the Commercial CompaniesGeneral Corporations Law and Law No. 26,831 (the“Capital Market Law”), which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States or in other jurisdictions outside Argentina. In addition, rules governing the Argentine securities markets are different and may be subject to different enforcement in Argentina than in other jurisdictions.

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

The Depositary will be treated by us for all purposes as the shareholder with respect to the shares underlying your ADSs. As a holder of ADRs representing the ADSs being held by the depositaryDepositary in your name, you will not have direct shareholder rights and may exercise voting rights with respect to the Class B Shares represented by the ADRs only in accordance with the deposit agreement relating to the ADSs. There are no provisions under Argentine law or under our By-laws that limit the exercise by ADS holders of their voting rights through the Depositary with respect to the underlying Class B Shares. However, there are practical limitations on the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with these holders. ADS holders may be unable to exercise voting rights with respect to the Class B Shares underlying the ADSs as a result of these practical limitations.

Item 4. Our Information

A.

Our History and Development

General

Operations

We commenced commercial operations on December 29, 1992, as the largest company created in connection with the privatization of GdE, the Argentine state-owned natural gas company, whose integrated

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operations included natural gas transportation and distribution. GdE was divided into ten companies;10 companies: two transportation companies and eight distribution companies.

Our legal name is Transportadora de Gas del Sur S.A., but we also conduct business under the name TGS. We are asociedad anónima, incorporated with limited liability under Argentine law on December 1, 1992. Our registered offices are located at Don Bosco 3672, 5th Floor, Buenos Aires (C1206ABF), Argentina, our telephone number is (54 11) 4865-9050 and our web address iswww.tgs.com.ar. Our contact agent in New York is Grayling, and its telephone number is (646) 284-9416.

We are currently the largest transporter of natural gas in Argentina, delivering, as of December 31, 2014, 60.4%2015, 61.4% of the total gas transported in Argentina, through 5,675 miles of pipeline, of which we own 4,745 miles. We operate the remaining 930 miles, which are owned by the Gas Trusts, for a fee. Substantially all of our transportation capacity, approximately 2.32.8 Bcf/d as of December 31, 2014,2015, is subscribed for under firm long-term natural gas transportation contracts. Natural gas transportation

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For additional information regarding our property, plant and equipment see “—D. Property, Plant and Equipment” below.

We are also one of the largest processors of natural gas and one of the largest marketers of Liquids in Argentina. We operate the General Cerri natural gas processing complex and the associated Galván loading and storage facility in Bahía Blanca in the Buenos Aires Province where Liquids are separated from natural gas transported through our pipeline system and stored for delivery. Revenues from our Liquids production and commercialization business represented 75.0%68.8% and 72.0%75.4% of our total net revenues during the years ended December 31, 20142015 and 2013,2014, respectively.

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commercialization activities and Ps. 151.6225.2 million related to other services activities. Information relating to the size and financing of future investments is included in “Item 5. Operating and Financial Review and Prospects.”

During 2012, YPF subscribed to 4.2 MMcf/d additional transportation capacity. The pipeline expansion works related to this incremental service involve an investment of approximately US$3.0 million (Ps. 14.7 million using the exchange rate as of December 31, 2012). The works are financed through the advance payment for service from YPF.

In addition, in 2013, we reached an agreement with PBB to build a new storage tank in our loading and storage facility located in Puerto Galván, Province of Buenos Aires. The new tank will have a net total capacity of approximately 5,500 short tons. The related works will requirerequired an investment of approximately

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The table below contains certain information for 2014,2015, as it relates to the distribution companies that are connected to our pipeline system:

⁽¹⁾Also connected to the TGN system.

Source: ENARGAS

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During 2014,In 2015, we successfully renewed our long-term firm transportation contracts having a total capacity of 1,176.088.3 MMcf/d for an average term of 6.5 years for the route from Neuquina basin.d.

Notwithstanding the successful results of the bidding process during 2014, the principal risk with respect to ourDuring 2016, 2017, and 2018, contracts having a long-term firm transportation contractscapacity of 44.1 MMcf/d, 47,7 MMcf/d and 45.9 MMcf/d, respectively are expiring. In this sense, our main challenge will be thetheir renewal, of the contractsespecially those for the route from Neuquén, consideringin light of the diminishing supply of natural gas from thisreduced production levels over the last years shown by the Neuquina basin. In addition, after the issuance of resolutionResolution No. 95/2013 of the Federal Energy Bureau, our power plant customers may decide not to renew their firm transportation contract with us. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business.” In 2015, we will start negotiations with clients for the renewal of the agreements that expire in the first half of the year for an 88.3 MMcf/d firm transportation capacity.

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Pipeline Operations

Pipeline Deliveries.The following table sets forth our average daily natural gas firm and interruptible transportation deliveries for 2015, 2014 2013 and 2012:2013:

In 2014 and 2013, weWe committed substantial efforts and resources to ensure the reliable and efficient operation of our pipelines. OurAverage daily injection of natural gas to our pipeline system was higher in 2015 than in 2014. In winter 2015, our pipeline system responded adequately to demand requirements, but the Federal Energy Bureau continued to intervene by redirecting the supply of natural gas from the industrial market to residential, commercial and Compressed Natural Gas station users. However, these industrial restrictions were lower than previous years due to a decrease in residential consumption caused by higher ambient temperatures.

It is worth highlighting that our pipeline system adequately met natural gas transportation demand in 2014,2015, presenting zero service interruptions and complying with the high requiredhigh-required operational standards.

We were able to achieve this level of service due in part to several maintenance, prevention and inspection measures. These measures include anAmong them, we have conducted in-line inspection program during 2014 and 2015 that will

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certain increased rate that may apply in the future). These amounts representrepresented annual revenues of approximately Ps. 25 million.

In addition, in April 2006, the MPFIPyS, the Federal Energy Bureau and natural gas transporters, among others, signed a letter of intent to carry out the Second Expansion (the“Second Expansion”) which is significantly larger than the First Expansion. The Second Expansion will increase the aggregate transportation capacity of our system by 378 MMcf/d. It involves the installation of over 708 miles of pipeline loops and 196,800 HP of additional power and the construction of a new pipeline in the Magellan Strait (the“New Magellan Strait Pipeline”), which permits the transportation of additional natural gas from the Austral basin. As of December 31, 2014,2015, the aggregate transportation capacity has increased by 307 MMcf/d of the Second Expansion project has been completed and is operational.  The remaining increase of 71 MMcf/d in capacity is expected to be completed in different stages.

The New Magellan Strait Pipeline was completed in March 2010, and is 24 miles long and has a natural gas transportation capacity of 600 MMcf/d. The completion of this new pipeline required the technical support of Petrobras Argentina Group (under the scope of the Technical Assistance Service Agreement, as defined in “Item 4. Our Information—B. Business Overview—Natural Gas Transportation—Pipeline Operations—Technical Assistance Service Agreement” below), which brought to the project its know-how and experience in off-shore activities. The dredging in the seabed and the later laying of the pipeline was carried out by the Dutch consortiumof Royal Boskalis Westminster NV and the Allseas Group S.A.

Ownership of the works of the Second Expansion is vested in a second Gas Trust and the investment is financed by other gas trust funds whose trustors are the natural gas producers and the shippers that have or will subscribe to the additional capacity. The works will be repaid with a new tariff charge that will ultimately be paid by the business and industrial users with firm transportation contracts, and not by the residential users. In addition, as the assets related to the Second Expansion are operational, we are in charge of their operation, maintenance (together with the assets related to the First Expansion) through an operation and maintenance agreement (“O&M Agreement”)and the rendering of natural gas firm transportation services. In order to compensate us for the operation and maintenance services provided with respect to the incremental transportation capacity associated with the expansions carried out by the Gas Trusts and us since 2006, we are paid a monthly Access and Use Charge (“CAU”), which currently is lower than the transportation tariff. The CAU has resulted in increased fees and revenues in our natural gas transportation segment as the expansion works have become operational.    

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117.5 million to continue the enhancement of the natural gas transportation system’s safety and reliability. We operate our pipelines and the pipeline constructed pursuant to the Gas Trust in accordance with Argentine natural gas transmission safety regulations, which are substantially similar to U.S. federal regulations. We believe that, based on the pipeline inspection reports we have received to date and the pipeline repairs and/or replacements being made to the General San Martín and Neuba I and II pipelines, the current operation of the pipeline system poses no significant safety risks. However, in order to identify changes in the safety regulations that our system pipeline has to comply with, we conduct inspections for the purpose of detecting increases in the population density in the areas through which our pipeline system extends. Changes in population densities would imply that we may need to increase safety measures in certain sections of the system.

The “greater” Buenos Aires is the surrounding area of the City of Buenos Aires, including the City of Buenos Aires. The last part of orour natural gas transportation system (the “Buenos Aires ring”) is located in the greater Buenos Aires, where we transfer natural gas to deliver natural gas to major natural gas distribution companies. At the Buenos Aires ring, onin the section ranging from General Rodríguez to General Pacheco, we are conducting a thorough quantitative risk assessments and implementing measures designed to minimize the risk in this segment, which runs through the most densely populated part of Argentina.

Since the commencement of our operations in late 1992, we have implemented measures to ensure that the service would not be interrupted in any relevant consumption center;center, and in the previous five years, we have not had significant ruptures in our natural gas transportation system’s pipeline.

In November 2015, we started recoating works in the proximities of Cipolleti, Río Negro, a 4-kilometer work in the Neuba I pipeline, successfully finished in January 2016.

Within the Stress“Stress Corrosion Cracking (“SCC”)Cracking” assessment and mitigation plan, we applied the susceptibility model to the discharge of the compressor plants of the Southern General San Martín Pipeline, conducting 15Neuba I recoating section, implementing 11 cracking verification wells, in which no evidence of cracking was detected. We alsowells. Additionally, to assess this threat we completed fluency tests along 35 kilometers23.6 miles of the Olavarría – Barker pipeline and we started the re-testing of 38 km in the pipeline section Gaviotas – General Cerri.Cerri pipeline section, in which no rupture occurred during the testing process. Finally, to continue our research and to feed our Susceptibility Model, we conducted a 226.8 miles inline inspection with magnetic technology to identify hard spots in the pipe material, technology used for the first time in our country.

Additionally, based on the analysis and planning carried out by the pipeline integrity team, we conducted a campaign for the survey and repair of 5059 external corrosion and/or geometrical failures.

InRegarding Cathodic Protection, to hinder the fieldadvance of cathodic protection,corrosion we continuecontinued strengthening the system with the installation of 106 new units and 13-grounded8 anode reinforcements. In addition,Also, regarding the remotely-operated gauging of cathodic protection units, 37 units have been updated and linked to the SCADA system (“Supervisory Control and Data AcquisitionAcquisition”). This optimizes the monitoring process, saving time and resources allocated to this critical task in our operations. In addition, regarding integrity inspections we conducted a diagnosis plan to verify the state of insulation coating in 280.2 miles of pipeline, and have not detected critical failures.

With the purpose of minimizing risks on the Buenos Aires ring section extending from General Rodríguez to General Pacheco, the area with greatest demographic concentration along the system, aswe conducted quantitative risk assessments to assess and define the implementation of adequate mitigation measures. We also implemented several preventive measures, such as:  

cathodicMoreover, we have started two significant risk mitigation works in this area. The first is the installation of an odoriferous unit at the Rodríguez plant, which will odorize gas from that point up to the Pacheco Plant. Second, we have installed 800 meters of pre-stressed material tiles in a sensitive segment of the pipeline, to reinforce the protection units. We also outlined a 110 kilometers direct integrity inspection plan,of both the advance status of which is of 50% as of December 31, 2014.facilities and their surroundings.

Finally, we are conductingcompleting implementation of a survey known as “Free-Span” inQuantitative Risk Analysis System, which will allow us to conduct a thorough and complex analysis of the underwater sections located inpipe system, detecting and optimizing activities for the Straitassessment and analysis of Magellan and onthreats to integrity, which will support the northern borders, to detect on the pipeline where the seabed sediments have been eroded by sea currents along the pipeline.creation of integrity programs.

Technical Assistance Service Agreement. As part of its bid to purchase a 70% interest in us from the Argentine government,Government, CIESA was required to have an investor-company with experience in natural gas transmission that would serve as our technical operator. In late 1992, we entered into a Technical Assistance Agreement with PEPCA (the “Technical Assistance Agreement”), an indirect, majority-owned subsidiary of Enron. The term of the Technical Assistance Agreement was for eight years from December 28, 1992, renewable automatically upon expiration for an additional eight-year term and was assigned to Petrobras Argentina Group as part of the Master Settlement Agreement. Since July 2004, Petrobras Argentina Group has been our technical operator and is in charge of providing assistance related to, among others, the operation and maintenance of the natural gas transportation system and related facilities and equipment in order to ensure that the performance of the system is in conformity with international natural gas transportation industry standards and in compliance with certain Argentine environmental standards. With the prior approval of ENARGAS and our Board of Directors, in October 2014,  we and Petrobras Argentina Group agreed to a technical assistance service agreement (the“Technical Assistance Service Agreement”) for a three-year term, expiring on December 28, 2017, which substantially contains the same terms as the Technical Assistance Agreement, as amended. Any amendment, renewal or even termination of the Technical Assistance Service Agreement has to be authorized by ENARGAS. Pursuant to the ENARGAS. TheTechnical Assistance Service Agreement, the currency for the technical assistance fee paid to Petrobras Argentina Group was changed from U.S. dollars to ArgentinaArgentine pesos. Our Audit Committee has analyzed the Technical Assistance Service Agreement and concluded that it is on market terms.

The Technical Assistance Service Agreement sets out the services to be provided by Petrobras Argentina Group to us, at the request of our Chief Executive Officer, in return for payment of a technical assistance fee paid on a monthly basis equal to the greater of (i) a fixed annual sum of Ps. 3 million or (ii) 7% of the amount obtained after subtracting Ps. 3 million from net income before interests and income taxes of the year. For the year ended December 31, 2014,2015, we paid Petrobras Argentina Group Ps. 7052.5 million for services rendered pursuant to the Technical Assistance Service Agreement. The services to be provided by Petrobras Argentina Group to us under the Technical Assistance Service Agreement include assisting us in the following matters to the extent that they arise in the ordinary course of business: (i) replacement, repair and renovation of facilities and equipment to ensure that the performance of the system is in accordance with international gas transportation industry standards; (ii) preparation of performance evaluations, operating cost analyses, construction assessments and advice related to budget control; (iii) advice regarding safety, reliability and efficiency of system operation and gas industry services; (iv) advice regarding compliance with applicable laws and regulations relating to safety and health, pollution and 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 aforesaid services; and (viii) design and implementation of a management information and inspection system for all major aspects of natural gas transportation and liquids production.

The Argentine Natural Gas Industry

Historical Background. Prior to the privatization of GdE, the Argentine natural gas industry was effectively controlled by the Government. In addition, prior to its privatization, YPF (at that time a wholly-owned Government company) held exclusive rights over the development and production of all new hydrocarbon reserves in Argentina.

In 1992, Natural Gas Law (the “Natural Gas Law”) was passed providing for the privatization of GdE. The Natural Gas Law and the related decrees provided for, among other things, the transfer of substantially all of the assets of GdE to two natural gas transportation companies and eight distribution companies. The transportation assets were divided into two systems on a broadly geographical basis, the northern and southern trunk pipeline systems, designed to give both systems access to natural gas sources

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and to main centers of demand, including the greater Buenos Aires area. As a result of the division, our natural gas transportation system is connected to the two natural gas distribution systems serving the greater

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·

approval of graded price increases of natural gas at the wellhead;

·

establishment of a framework for the constitution of Gas Trusts to finance natural gas pipeline expansions;

·

the passage of Law No. 26,741, which declares that hydrocarbons self-sufficiency, as well as their production, industrialization, transport and marketing, are activities of public interest and primary goals of Argentina, empowering the Argentine governmentGovernment to take the necessary measures to achieve such goals;

·

through the enactment of Decree No. 929/2013 creating a regimen to promote investment in the exploitation of hydrocarbons;

·

the expropriation of YPF, and the entry into agreements with important natural gas producers in

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In addition, on April 7, 2016 the Ministry of Energy enacted Resolution No. 41/2016 which increased the price of the natural gas consumed by power plants starting on April 1, 2016.

Natural Gas Demand.Natural gas consumption in Argentina has played a significant role in the energy industry in recent years, reaching more than 50% of total national energy consumption, which is greater than the comparable percentage for worldwide energy consumption. The graphics below illustrate the increase and breakdown of natural gas consumption in Argentina in 2003 and 20142015 by type of consumer:

Source:ENARGAS

Beginning in 2003, a sharp increase in natural gas demand occurred as a consequence of: (i) the recovery of certain industries in the Argentine economy since 2003, (ii) the 2002 devaluation of the peso and pesification of transportation and distribution tariffs and the elimination of both tariff and wellhead gas price adjustments, making this fuel relatively inexpensive for consumers as compared to other types of fuel the prices of which are affected by inflation, and (iii) the growth of GDP between 2003 and 2013. As a result, natural gas became, by far, the cheapest fuel in Argentina and high rates of substitution of natural gas for other fuels in industry, power plants and vehicles have been observed. Likewise, the rising demand for gas has also been based on the recovery of many industrial segments of the Argentine economy, and the

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with a maximum volume of around 694.3654.9 MMcf/d in 2014.2015. This action achieved a substantial saving in natural gas imports costs as the average price of natural gas imported from Bolivia iswas approximately US$116.23 per million BTU, significantly lower than the over US$16.511.0 per million of BTU that must be paid for LNG imported from tankers.tankers for the fiscal year 2015.

Additionally, expansion works are currently being conducted on the Northern Pipeline managed by TGN under the Gas Trust Fund Program, which will allow for the transportation of an additional 70 MMcf/d from Bolivia. The Juana Azurduy Pipeline crosses the border between Argentina and Bolivia and is connected to a compressor plant in Campo Durán, Argentina. This new pipeline will supply natural gas to the provinces in Argentina that are not currently reached by natural gas pipeline systems.

In addition, in recent years, injections of natural gas from LNG tankers have played an important role in satisfying the growing natural gas demand during the coldest months of the year. Natural gas injection from the LNG re-gasification tankers located in Bahía Blanca and Escobar increased slightlydecreased in 2014,2015, to 573535.5 MMcf/d from an average of 585573.2 MMcf/d in 2013.2014. ENARGAS has assigned to us the responsibility of controlling the operation and maintenance of certain new facilities constructed to connect the regasification ship at Bahía Blanca to our existing transportation pipeline.

Decree No. 929/2013 created the Investment Promotion Regime for the Exploitation of Hydrocarbons, with the goal of promoting investments in the exploitation of hydrocarbons in Argentina. The scheme will benefit holders of exploration permits and exploitation concessions granted by both the Government and the provinces. The promotion schemes will also benefit holders of concessions or others who present an investment in exploration of hydrocarbons in an amount not less than one billion dollars of foreign currency.

If such an investment were made within a five year period, at the end of such period, the beneficiary will have the right to freely export 20% of the production of oil and gas produced in the project free of export tax. In addition, beneficiaries will have the free availability of 100% of the revenues from the export of such hydrocarbons.

On October 31, 2014, the Official Gazette of the Argentine Republic published the text of Law No. 27,007 (the“Hydrocarbons Law”) that amends Law No. 17,319. The Hydrocarbons Law introduces severalsubstantial modifications in the regulatory framework for the oil & gas industry in Argentina.Argentina, among others. It extends to all investment projects the Investment Promotion Regime for the Exploitation of Hydrocarbons, which previously had applied only to projects that represent a direct investment in currency of notenot less than 250 million dollars.

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According to data recently published by the FederalMinistry of Energy, Bureau, Argentine natural gas output edged 0.5% lowerincreased 3.6% in 2015 as compared to 2014 versus 2013 to 1,465.01,517.6 billion cubic feet, representing the lowest reduction infirst increase the last five years. This change was driven mainly by a 12.5% increase in production by nationalized YPF, which largely offset the decline by other producers. During 2014,2015, the annual volume of natural gas injected in our pipeline system was approximately 2,133.62,761.7 Bcf/d while the its available total firm contracted capacity was 2,931.12,846.5 Bcf/d.

In April 2012, the Executive Branch issued Decrees No. 530/12 and 557/12 which called for the 30-day legal intervention of YPF and YPF Gas S.A., giving the Executive Branch temporary management of YPF and YPF Gas S.A. Then, in May 2012, the National Congress enacted a proposed law which expropriated the 51% of YPF and YPF Gas S.A. capital share owned by Repsol YPF, causing YPF to become 51% owned by the Argentine government.Government. Since the expropriation of YPF, the Argentine governmentGovernment has played an important role signing agreements with foreign and local oil companies in order to develop an investment plan, which allows the increase of the reserves of the Neuquina basin and the domestic Argentine natural gas supply. On February 25, 2014, the Repsol YPF board approved a compensation package of US$5 billion from Argentina for the nationalization.

In order to increase the existing natural gas reserves from the Neuquina basin, in July 2013, YPF announced the execution of an agreement with Chevron to develop oil and gas shale deposits in this province. During 2014, YPF continued negotiating with oil companies to reach new partnership agreements that will provide technology and capital resources for the exploitation of new reserves. In December 2014, YPF signed agreements with Petronas to invest US$ 550 million and in January 2015, YPF and SINOPEC signed a memorandum of understanding aimed at eventually collaborating to develop oil-and-gas projects.

Recently, in December 2015, YPF and Dow Argentina S.A., a subsidiary of Dow Chemical Co., announced an investment of US$ 500 million in 2016 for shale gas exploration in Argentina. Both companies, which have already invested $350 million in a joint shale gas venture, said in a statement that total investment could reach US$ 2.5 billion in coming years. The joint venture is the leading shale gas project of its kind in Argentina, with daily production of about 750,000 cubic meters. The aim is to triple daily production  in 2016 to approximately 2 million cubic meters.

Neuquina Basin. The largest of the natural gas basinsbasin and the major source of natural gas supply for our system is the Neuquina basin, located in west central Argentina. However, in recent years, its proved natural gas reserves have been decreasing sharply as a result of exploration and exploitation, and new gas reserves have not been found in order to replace the natural gas produced. In December 2010, new non-conventional natural gas was discovered in the Neuquina basin by YPF. This new natural gas reserve is at the beginning stages of its exploitation, which will require several years and involve high extraction costs. In recent years, as mentioned above, in order to increase the existing natural gas reserves from the Neuquina basin, YPF announced the signing of certain agreements with Chevron and Petronas to develop oil and natural gas shale deposits in the province of Neuquén. A new memorandum of understanding was signed in January 2015 with SINOPEC. In addition, YPF continues negotiating with oil companies to reach new partnership agreements that will provide technology and capital resources for the exploitation of new reserves.

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ENARGAS has broad authority to regulate the operations of the transportation and distribution companies, including the ability to set rates pursuant to the Public Emergency Law. ENARGAS has its own budget which must be included in the Argentine national budget and submitted to the Federal Congress for approval. ENARGAS is funded principally by annual control and inspection fees that are levied on regulated entities in an amount equal to the approved budget, net of collected penalties, allocated proportionately to each regulated entity based on its respective gross regulated revenues, excluding natural gas purchase and transportation costs in the case of distribution companies. ENARGAS also collects the fines imposed for violations of the Natural Gas Law.

Since 2004, the Government adopted a series of measures to redistribute the effects of the crisis in the energy sector caused by the natural gas shortage. Most of the electrical power stations do not have firm gas supply agreements and have increasingly used imported natural gas or alternative fuels that are more expensive than natural gas produced in Argentina. For this reason, ENARGAS and the Federal Energy Bureau have issued a series of regulations aimed at averting a crisis in the internal system of natural gas supply.

The Executive Branch issued Decree No. 181/04, directing the Federal Energy Bureau to establish a system of priority pursuant to which power stations and natural gas distribution companies (for their residential clients) could receive natural gas in priority to other users, even those with firm transportation and firm gas supply contracts. On April 21, 2004, MPFIPyS issued Resolution No. 208/04 that ratified an agreement between the Federal Energy Bureau and natural gas producers to give effect to this new system.

On March 23, 2005, we received a notice from the Federal Energy Bureau providing that, in the event there is insufficient natural gas available in the market to supply power stations, we may be required to interrupt transportation services (including those with firm transportation contracts) to our customers in order to give priority to natural gas distribution companies and power plants that have not entered into natural gas firm transportation contracts. In any such case, ENARGAS will set the priority of transportation.

Under these circumstances and our License, when ENARGAS asks us to restrict the provision of natural gas to clients who hold firm transportation contracts, we are exposed to potential claims from, among others, our customers. Therefore, we have requested that in connection with these new procedures, ENARGAS submit to us written instructions for any such natural gas firm transportation service interruption request. However, if ENARGAS does not accept our petition and we do not comply with ENARGAS’ENARGAS’s instructions, if any, in order to avoid future claims from our customers, Resolution No. 208/04 will require us to pay the price difference between natural gas and the alternative fuel used by power stations in order to offset the loss resulting from our failure to comply with the instructions.

In October 2010, ENARGAS issued Resolution No. 1,410/2010 which set new rules for natural gas dispatch applicable to all participants in the natural gas industry and imposed new and more severe priority

2

to the demand regarded as top priority, mainly residential users, CNG stations and industries connected to the distribution network.

During the 2013 and 2014 winters, ourThe imports of natural gas pipeline system metby the demand for natural gas due to increased natural gas importsGovernment from Bolivia andwithin the higher imported natural gas injections fromframework of the agreement entered by both countries, reached an average volume in 2015 of 577.3 MMcf/d, slightly lower than the volume of 582.1 MMcf/d recorded in 2014. Likewise, LNG re-gasification tankerimports through the tankers located inat the Portports of Bahía Blanca which is connected to our system. The injection of re-gasified natural gas from the LNG re-gasification tanker located in Bahía Blanca and the tanker in Escobar (which is connected to the TGN transportation system) kept stable fromrecorded an average 585volume of 535.5 MMcf/d in 2013 to 5732015, somewhat lower than the 573.2 MMcf/d recorded in 2014. In addition, the drop in prices of oil and byproducts has represented a significant decrease in the amounts paid by the Government for these products.

With the purpose of re-directing and allocating the supply to higher priority consumers, mainly residential, commercial and CNG stations, restrictions to gas supply to the industrial sector continued to occur in the lastrecent winters, although to a lesser extent than has been observed in the past. The restrictions set forth by the intervening authority affected direct shippers who have firm transportation contracts with us, as well as industries in different distribution areas of the country.

We do not believe that our compliance will result in legal action by any of our natural gas firm transportation clients, whichclients. However, any legal action, if brought, could have a significant adverse economic and financial effect on us.  See “Item 3 Key Information—D. Risk Factors.”  

Our License. Our License authorizes us to provide the public service of natural gas transportation through the exclusive utilization of the southern natural gas transportation system. Our License does not grant us an exclusive right to transport natural gas in a specified geographical area and licenses may be granted to others for the provision of gas transportation services in the same geographical area. TGN’s natural gas transportation system is comprised of two transmission pipes, the North pipeline and Central western pipeline, and is operated under a license containing substantially similar terms to those described below and elsewhere herein.

Our License was granted for an original term of 35 years beginning on December 29, 1992. However, the Natural Gas Law provides that we may apply to ENARGAS for a renewal of our License for an additional ten-year10-year term. ENARGAS is required at that time to evaluate our performance and make a recommendation to the Executive Branch. If ENARGAS determines that we are in substantial compliance with all our obligations arising under the Natural Gas Law, related regulations and our License, the renewal should be granted by the Executive Branch. ENARGAS would havebear the burden of proving that we had not complied with the obligations described above and, therefore, should not be granted a renewal. At the end of the 35-year or 45-year term, as the case may be, the Natural Gas Law requires that a new competitive auction be held for the license, allowing us the option, if we have complied substantially with our obligations described above, to match the best bid offered to the Government by any third party. To the extent that we were found not to have complied with the obligations described above or chose not to seek renewal of our License, we would be

3

based, among other considerations, upon the severity of the breach or its effect on the public interest. Fines of up to Ps. 500,000 may be levied for any breaches. Revocation of our License may only be declared by the Executive Branch upon the recommendation of ENARGAS. Our License specifies several grounds for revocation, including the following:

·

repeated failure to comply with the obligations of our License and failure to remedy a significant breach of an obligation in accordance with specified procedures;

·

total or partial interruption of the service for reasons attributable to us, affecting completely or partially transportation capacity during the periods stipulated in our License;

·

sale, assignment or transfer of our essential assets or otherwise encumbering such assets without ENARGAS’ENARGAS’s prior authorization, unless such encumbrances serve to finance expansions and improvements to the gas pipeline system;

·

bankruptcy, dissolution or liquidation; and

·

ceasing and abandoning the provision of the licensed service, attempting to assign or unilaterally transfer our License in full or in part without the prior authorization of ENARGAS, or giving up our License, other than in the cases permitted therein.

Our License also prohibits us from assuming debt of, or granting credit to, CIESA, and creating security interests in favor of, or granting any other benefit to, creditors of CIESA.

Generally, our License may not be amended without our consent. As part of the Renegotiation Processrenegotiation of our license under the Public Emergency Law, however, the terms of our License may be changed or our License may be revoked. In addition, ENARGAS may alter the terms of service annexed to our License. If any such alteration were to have an economic effect on us, ENARGAS should modify our rates to compensate for such effect or we could request a change in the applicable rates.

Regulation of Transportation Rates—Actual Rates.The natural gas transportation rates established under each transportation company must be calculated in U.S. dollars and converted into pesos at the time of billing pursuant to the terms of such license. However, the Public Emergency Law eliminated tariff indexing covenants based on U.S. dollar exchange rate fluctuations and established a conversion rate of one peso equal to one U.S. dollar for tariffs.

The rate for natural gas firm transportation services consists of a capacity reservation charge and is expressed as a maximum monthly charge based on the cubic meters per day of reserved transportation

4

(1)

Monthly charge for every cubic meter per day of reserved transportation capacity.

(2)

Minimum charge equal to the unit rate of the firm reservation charge at a 100% load factor.

(3)

Maximum percentage of total transported gas which customers are required to replace in-kind to make up for gas used by us for compressor fuel or losses in rendering transportation services.

Note: The gross receipts tax is not included in such transportation rates

Source: ENARGAS Resolution No. 2,496/023347

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(1)

Monthly charge for every cubic meter per day of reserved transportation capacity.

(2)

Minimum charge equal to the unit rate of the firm reservation charge at a 100% load factor.

(3)

Maximum percentage of total transported gas which customers are required to replace in-kind to make up for gas used by us for compressor fuel or losses in rendering transportation services.

Note: The gross receipts tax is not included in such transportation rates

Source: ENARGAS Resolution No. 2,852/143724

In addition, we are entitled to a CAU, which has also remained unchangedincreased once as from May 1, 2015 by 73.2% and as from April 1, 2016 by 200.1 % since its institution in 2005 by ENARGAS. This charge, which represents approximately 48% 58%of the current tariff, is paid by clients that required the additional transportation capacity or who financed their expansions by means of advance payments, and is set by ENARGAS. In 2014,2015, we recognized revenues of Ps. 49.9 million72.4 as a result of the CAU. However, given the permanent increase of operational and maintenance costs throughout the years, which now exceed the amount of the CAU, we filed a claim against the National Government to obtain the adjustment of the values and ensure a fair compensation for the service it renders. See “Item 4. Our Information—B. Business Overview—Natural Gas Transportation—Pipeline Operations—Pipeline Expansions.” The CAU charge is not applicable to the first pipeline expansion undertaken in 2005.  

The Public Emergency Law and UNIREN.Renegotiation Agreement. The Public Emergency Law granted the Executive Branch power to renegotiate contracts entered into with private utility companies, pursuant to the framework included in the Public Emergency Law. The Public Emergency Law has been extended until December 31, 2015.2017.

In July 2003, UNIREN was created under the joint jurisdiction of the MEF and MPFIPyS. This unit, which is the successor of the former Committee for the Renegotiations of Public Services and Works Contracts, is conducting the renegotiation of contracts related to utilities and public works, and is empowered

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to reach total or partial agreements with the licensees and submit proposals regulating the transitory adjustment of tariffs and prices, among other things. No progress was made in our renegotiation process until December 2003, when we discussed preliminary documents with UNIREN, including (i) the renegotiation guidelines, which determined the preparation of an agenda and a schedule for its discussion,discussion; (ii) a draft agenda which was

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