UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2020
EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR)
(DISTRIBUTION AND MARKETING COMPANY OF THE NORTH )
(Translation of Registrant's Name Into English)
Argentina
(Jurisdiction of incorporation or organization)
Av. del Libertador 6363,
12th Floor,
City of Buenos Aires (A1428ARG),
Tel: 54-11-4346-5000
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
Yes No X
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .)
CONDENSED INTERIM FINANCIAL STATEMENTS
AS OF JUNE 30, 2020 AND FOR THE SIX AND THREE-MONTH PERIOD ENDED JUNE 30, 2020
PRESENTED IN COMPARATIVE FORM
(Stated in thousands of constant pesos – Note 3)
|
Legal Information | 2 |
Condensed Interim Statement of Financial Position | 3 |
Condensed Interim Statement of Comprehensive Income | 5 |
Condensed Interim Statement of Changes in Equity | 6 |
Condensed Interim Statement of Cash Flows | 7 |
Notes to the Condensed Interim Financial Statements: | ||
1 | | General information | 9 |
2 | | Regulatory framework | 10 |
3 | | Basis of preparation | 13 |
4 | | Accounting policies | 13 |
5 | | Financial risk management | 14 |
6 | | Critical accounting estimates and judgments | 16 |
7 | | Contingencies and lawsuits | 18 |
8 | | Property, plant and equipment | 19 |
9 | | Right-of-use asset | 21 |
10 | | Other receivables | 21 |
11 | | Trade receivables | 22 |
12 | | Financial assets at fair value through profit or loss | 22 |
13 | | Inventories | 22 |
14 | | Cash and cash equivalents | 23 |
15 | | Share capital and additional paid-in capital | 23 |
16 | | Allocation of profits | 23 |
17 | | Trade payables | 23 |
18 | | Other payables | 24 |
19 | | Borrowings | 24 |
20 | | Salaries and social security taxes payable | 25 |
21 | | Income tax and deferred tax | 25 |
22 | | Tax liabilities | 26 |
23 | | Provisions | 26 |
24 | | Revenue from sales | 26 |
25 | | Expenses by nature | 27 |
26 | | Other operating expense, net | 28 |
27 | | Net financial expense | 28 |
28 | | Basic and diluted (loss) earnings per share | 29 |
29 | | Related-party transactions | 29 |
30 | | Ordinary and Extraordinary Shareholders’ Meeting | 30 |
31 | | Termination of agreement on real estate asset | 31 |
32 | | Events after the reporting period | 31 |
Report on Condensed Interim Financial Statements’ Review | ||
|
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Glossary of Terms
The following definitions, which are not technical ones, will help readers understand some of the terms used in the text of the notes to the Company’s Condensed Interim Financial Statements.
Terms | Definitions | |
BCRA | Central Bank of Argentina | |
BICE | Banco de Inversión y Comercio Exterior | |
BNA | Banco de la Nación Argentina | |
CABA | City of Buenos Aires | |
CAMMESA | Compañía Administradora del Mercado Mayorista Eléctrico S.A. (the company in charge of the regulation and operation of the wholesale electricity market) | |
CNV | National Securities Commission | |
CPD | Company’s Own Distribution Cost | |
CSJN | Supreme Court of Justice of Argentina | |
CTLL | Central Térmica Loma de la Lata S.A. | |
DNU | Executive Order issued on the grounds of Necessity and Urgency | |
EASA | Electricidad Argentina S.A. | |
edenor | Empresa Distribuidora y Comercializadora Norte S.A. | |
ENRE | National Regulatory Authority for the Distribution of Electricity | |
FACPCE | Argentine Federation of Professional Councils in Economic Sciences | |
FIDUS | FIDUS Sociedad de Garantías Recíprocas | |
IAS | International Accounting Standards | |
IASB | International Accounting Standards Board | |
ICBC | Industrial and Commercial Bank of China | |
IEASA | Integración Energética Argentina S.A. | |
IFRIC | International Financial Reporting Interpretations Committee | |
IFRS | International Financial Reporting Standards | |
IMF | International Monetary Fund | |
MEM | Wholesale Electricity Market | |
OSV | Orígenes Seguros de Vida S.A. | |
PBA | Province of Buenos Aires | |
PEN | Federal Executive Power | |
PESA | Pampa Energía S.A. | |
RDSA | Ribera Desarrollos S.A. | |
RECPAM | Gain (Loss) on exposure to the changes in the purchasing power of the currency | |
REM | Market Expectations Survey | |
RTI | Tariff Structure Review | |
SACME | S.A. Centro de Movimiento de Energía | |
SACDE | Sociedad Argentina de Construcción y Desarrollo Estratégico S.A. | |
SEGBA | Servicios Eléctricos del Gran Buenos Aires S.A. | |
WHO | World Health Organization |
1 |
|
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Legal Information
Corporate name: Empresa Distribuidora y Comercializadora Norte S.A.
Legal address: 6363 Av. del Libertador Ave., City of Buenos Aires
Main business: Distribution and sale of electricity in the area and under the terms of the Concession Agreement by which this public service is regulated.
Date of registration with the Public Registry of Commerce:
- of the Articles of Incorporation: August 3, 1992
- of the last amendment to the By-laws: May 28, 2007 – Note 29
Term of the Corporation: August 3, 2087
Registration number with the “Inspección General de Justicia” (the Argentine governmental regulatory agency of corporations): 1,559,940
Parent company: PESA
Legal address: 1 Maipú Street, CABA
Main business of the parent company: Study, exploration and exploitation of hydrocarbon wells, development of mining activities, industrialization, transport and sale of hydrocarbons and their by-products, and the generation, transmission and distribution of electricity. Investment in undertakings and in companies of any nature on its own account or on behalf of third parties or associates of third parties in Argentina or abroad.
Interest held by the parent company in capital stock and votes: 55.126%
CAPITAL STRUCTURE
AS OF JUNE 30, 2020
(amounts stated in pesos)
Class of shares | Subscribed and paid-in (See Note 15) | |
Common, book-entry shares, face value 1 and 1 vote per share | ||
Class A | 462,292,111 | |
Class B (1) | 442,210,385 | |
Class C (2) | 1,952,604 | |
906,455,100 |
(1) | Includes 31,380,871 treasury shares as of June 30, 2020 and December 31, 2019. |
(2) | Relates to the Employee Stock Ownership Program Class C shares that have not been transferred. |
2 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
edenor
Condensed Interim Statement of Financial Position
as of June 30, 2020 presented in comparative form
(Stated in thousands of constant pesos – Note 3)
Note | 06.30.20 | 12.31.19 | |||
ASSETS | |||||
Non-current assets | |||||
Property, plant and equipment | 8 | 116,330,038 | 115,179,076 | ||
Interest in joint ventures | 10,574 | 12,680 | |||
Right-of-use asset | 9 | 257,419 | 296,693 | ||
Other receivables | 10 | 42,754 | 29,599 | ||
Total non-current assets | 116,640,785 | 115,518,048 | |||
Current assets | |||||
Inventories | 13 | 1,969,239 | 2,190,893 | ||
Other receivables | 10 | 501,159 | 329,384 | ||
Trade receivables | 11 | 13,994,505 | 14,167,443 | ||
Financial assets at fair value through profit or loss | 12 | - | 3,172,115 | ||
Cash and cash equivalents | 14 | 5,678,533 | 465,775 | ||
Total current assets | 22,143,436 | 20,325,610 | |||
TOTAL ASSETS | 138,784,221 | 135,843,658 |
3 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
edenor
Condensed Interim Statement of Financial Position
as of June 30, 2020 presented in comparative form (continued)
(Stated in thousands of constant pesos – Note 3)
Note | 06.30.20 | 12.31.19 | |||
EQUITY | |||||
Share capital and reserve attributable to the owners of the Company | |||||
Share capital | 15 | 875,074 | 875,074 | ||
Adjustment to share capital | 15 | 30,261,865 | 30,261,865 | ||
Treasury stock | 15 | 31,381 | 31,381 | ||
Adjustment to treasury stock | 15 | 648,469 | 648,469 | ||
Additional paid-in capital | 15 | 420,690 | 420,690 | ||
Cost treasury stock | (2,549,907) | (2,549,907) | |||
Legal reserve | 2,155,588 | 1,465,745 | |||
Voluntary reserve | 35,658,139 | 22,551,131 | |||
Other comprehensive loss | (245,149) | (245,149) | |||
Retained earnings | (1,795,640) | 13,796,850 | |||
TOTAL EQUITY | 65,460,510 | 67,256,149 | |||
LIABILITIES | |||||
Non-current liabilities | |||||
Trade payables | 17 | 444,351 | 420,191 | ||
Other payables | 18 | 5,505,985 | 4,570,433 | ||
Borrowings | 19 | 9,537,411 | 9,320,704 | ||
Deferred revenue | 1,199,820 | 307,100 | |||
Salaries and social security payable | 20 | 309,343 | 273,535 | ||
Benefit plans | 737,405 | 595,710 | |||
Deferred tax liability | 21 | 22,944,502 | 22,803,049 | ||
Provisions | 23 | 2,090,974 | 2,345,237 | ||
Total non-current liabilities | 42,769,791 | 40,635,959 | |||
Current liabilities | |||||
Trade payables | 17 | 21,557,074 | 14,441,169 | ||
Other payables | 18 | 2,940,927 | 4,089,452 | ||
Borrowings | 19 | 1,058,691 | 1,886,597 | ||
Derivative financial instruments | 3,790 | 233,370 | |||
Deferred revenue | 31,720 | 6,079 | |||
Salaries and social security payable | 20 | 2,183,723 | 2,736,884 | ||
Benefit plans | 51,119 | 58,124 | |||
Income tax payable | 21 | 1,038,770 | 2,239,275 | ||
Tax liabilities | 22 | 1,442,873 | 2,017,463 | ||
Provisions | 23 | 245,233 | 243,137 | ||
Total current liabilities | 30,553,920 | 27,951,550 | |||
TOTAL LIABILITIES | 73,323,711 | 68,587,509 | |||
TOTAL LIABILITIES AND EQUITY | 138,784,221 | 135,843,658 |
The accompanying notes are an integral part of the Condensed Interim Financial Statements.
4 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
edenor
Condensed Interim Statement of Comprehensive (Loss) Income
for the six and three-month period ended June 30, 2020
presented in comparative form
(Stated in thousands of constant pesos – Note 3)
Six months at | Three months at | ||||||||
Note | 06.30.20 | 06.30.19 | 06.30.20 | 06.30.19 | |||||
Revenue | 24 | 39,695,934 | 51,035,304 | 17,978,204 | 26,053,250 | ||||
Electric power purchases | (25,380,109) | (31,000,291) | (11,831,083) | (14,600,561) | |||||
Subtotal | 14,315,825 | 20,035,013 | 6,147,121 | 11,452,689 | |||||
Transmission and distribution expenses | 25 | (8,393,578) | (9,853,269) | (4,557,721) | (5,078,020) | ||||
Gross margin | 5,922,247 | 10,181,744 | 1,589,400 | 6,374,669 | |||||
Selling expenses | 25 | (4,564,481) | (4,592,868) | (2,804,195) | (2,233,051) | ||||
Administrative expenses | 25 | (1,873,105) | (2,084,673) | (959,814) | (1,050,539) | ||||
Other operating expense, net | 26 | (250,220) | (1,156,391) | (189,701) | (726,095) | ||||
Gain from interest in joint ventures | (578) | 467 | (578) | 467 | |||||
Operating profit | (766,137) | 2,348,279 | (2,364,888) | 2,365,451 | |||||
Agreement on the Regularization of Obligations | - | 18,658,875 | - | 18,658,875 | |||||
Financial income | 27 | 631,249 | 588,115 | 268,775 | 307,017 | ||||
Finance costs | 27 | (2,937,298) | (4,508,499) | (1,651,664) | (1,951,763) | ||||
Other finance costs | 27 | (1,416,278) | (630,993) | (623,854) | 362,602 | ||||
Net finance costs | (3,722,327) | (4,551,377) | (2,006,743) | (1,282,144) | |||||
Monetary gain (RECPAM) | 3,261,651 | 8,320,378 | 1,487,185 | 3,151,097 | |||||
Profit before taxes | (1,226,813) | 24,776,155 | (2,884,446) | 22,893,279 | |||||
Income tax | 21 | (568,826) | (9,313,602) | 327,044 | (7,636,218) | ||||
Profit for the period | (1,795,639) | 15,462,553 | (2,557,402) | 15,257,061 | |||||
Comprehensive income for the period attributable to: | |||||||||
Owners of the parent | (1,795,639) | 15,462,553 | (2,557,402) | 15,257,061 | |||||
Comprehensive profit for the period | (1,795,639) | 15,462,553 | (2,557,402) | 15,257,061 | |||||
Basic and diluted earnings profit per share: | |||||||||
Earnings per share | 28 | (2.05) | 17.67 | (2.90) | 16.98 |
The accompanying notes are an integral part of the Condensed Interim Financial Statements.
5 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
edenor
Condensed Interim Statement of Changes in Equity
for the six-month period ended June 30, 2020
presented in comparative form
(Stated in thousands of constant pesos – Note 3)
Share capital | Adjustment to share capital | Treasury stock | Adjustment to treasury stock | Additional paid-in capital | Cost treasury stock | Legal reserve | Voluntary reserve | Other comprehesive loss | Retained earnings | Total equity | |||||||||||
Balance at December 31, 2018 | 883,344 | 30,498,679 | 23,111 | 411,655 | 420,690 | (1,868,657) | 267,097 | 641,767 | (239,316) | 23,108,011 | 54,146,381 | ||||||||||
Ordinary and Extraordinary Shareholders’ Meeting held on April 24, 2019 | - | - | - | - | - | - | 1,198,023 | 21,908,641 | - | (23,106,664) | - | ||||||||||
Acquisition of own shares | (8,270) | (257,203) | 8,270 | 257,203 | - | (682,002) | - | - | - | - | (682,002) | ||||||||||
Profit for the six-month period | - | - | - | - | - | - | - | - | - | 15,462,553 | 15,462,553 | ||||||||||
Balance at June 30, 2019 | 875,074 | 30,241,476 | 31,381 | 668,858 | 420,690 | (2,550,659) | 1,465,120 | 22,550,408 | (239,316) | 15,463,900 | 68,926,932 | ||||||||||
Ordinary and Extraordinary Shareholders’ Meeting held on April 24, 2019 | - | - | - | - | - | - | 625 | 723 | - | (1,348) | - | ||||||||||
Other comprehensive loss | - | - | - | - | - | - | - | - | (5,833) | - | (5,833) | ||||||||||
Acquisition of own shares | - | 20,389 | - | (20,389) | - | 752 | - | - | - | - | 752 | ||||||||||
Profit for the six-month period | - | - | - | - | - | - | - | - | - | (1,665,702) | (1,665,702) | ||||||||||
Balance at December 31, 2019 | 875,074 | 30,261,865 | 31,381 | 648,469 | 420,690 | (2,549,907) | 1,465,745 | 22,551,131 | (245,149) | 13,796,850 | 67,256,149 | ||||||||||
Ordinary and Extraordinary Shareholders’ Meeting held on April 28, 2020 (Note 30) | - | - | - | - | - | - | 689,843 | 13,107,008 | - | (13,796,851) | - | ||||||||||
Profit for the six-month period | - | - | - | - | - | - | - | - | - | (1,795,639) | (1,795,639) | ||||||||||
Balance at June 30, 2020 | 875,074 | 30,261,865 | 31,381 | 648,469 | 420,690 | (2,549,907) | 2,155,588 | 35,658,139 | (245,149) | (1,795,640) | 65,460,510 |
The accompanying notes are an integral part of the Condensed Interim Financial Statements.
6 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
edenor
Condensed Interim Statement of Cash Flows
for the six-month period ended June 30, 2020
presented in comparative form
(Stated in thousands of constant pesos – Note 3)
Note | 06.30.20 | 06.30.19 | |||
Cash flows from operating activities | |||||
Profit for the period | (1,795,639) | 15,462,553 | |||
Adjustments to reconcile net (loss) profit to net cash flows from operating activities: | |||||
Depreciation of property, plants and equipments | 8 | 2,735,640 | 2,677,406 | ||
Depreciation of right-of-use assets | 9 | 127,120 | 65,625 | ||
Loss on disposals of property, plants and equipments | 8 | 60,024 | 48,461 | ||
Net accrued interest | 27 | 2,303,097 | 3,919,097 | ||
Exchange difference | 27 | 1,371,216 | 1,007,358 | ||
Income tax | 21 | 568,826 | 9,313,602 | ||
Allowance for the impairment of trade and other receivables, net of recovery | 25 | 1,904,634 | 580,095 | ||
Adjustment to present value of receivables | 27 | 74,760 | (12,287) | ||
Provision for contingencies | 23 | 89,797 | 900,303 | ||
Changes in fair value of financial assets | 27 | (62,863) | (445,141) | ||
Accrual of benefit plans | 25 | 271,095 | 206,798 | ||
Net gain from the repurchase of Corporate Notes | 27 | (44,483) | 2,641 | ||
Gain from interest in joint ventures | 578 | (467) | |||
Income from non-reimbursable customer contributions | 26 | (4,997) | (4,124) | ||
Termination of agreement on real estate asset | (10,458) | - | |||
Other financial results | 84,900 | - | |||
Agreement on the Regularization of Obligations | - | (18,658,875) | |||
Monetary gain (RECPAM) | (3,261,651) | (8,320,378) | |||
Changes in operating assets and liabilities: | |||||
Increase in trade receivables | (2,270,244) | (5,538,179) | |||
Increase in other receivables | (216,368) | (369,727) | |||
Increase in inventories | (140,346) | (594,944) | |||
Increase in deferred revenue | 961,099 | - | |||
Increase in trade payables | 7,003,774 | 8,875,923 | |||
Increase (Decrease) in salaries and social security payable | 12,844 | (476,652) | |||
Decrease in benefit plans | (213,487) | - | |||
Decrease in tax liabilities | (403,193) | (1,826) | |||
(Decrease) Increase in other payables | (71,282) | 1,721,699 | |||
Derivative financial instruments payments | (265,509) | - | |||
Decrease in provisions | 23 | (35,234) | (70,979) | ||
Payment of income tax payable | (1,476,160) | (2,220,801) | |||
Net cash flows generated by operating activities | 7,297,490 | 8,067,181 |
7 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
edenor
Condensed Interim Statement of Cash Flows
for the six-month period ended June 30, 2020
presented in comparative form (continued)
(Stated in thousands of constant pesos – Note 3)
Note | 06.30.20 | 06.30.19 | |||
Cash flows from investing activities | |||||
Payment of property, plants and equipments | (3,492,697) | (6,637,756) | |||
Net collection of financial assets | - | 1,694,038 | |||
Redemtion net of money market funds | 3,207,002 | 927,169 | |||
Mutuum charges granted to third parties | 26,338 | 137,661 | |||
Mutuum payments granted to third parties | - | (212,167) | |||
Collection of receivables from sale of subsidiaries | 4,273 | 8,875 | |||
Net cash flows used in investing activities | (255,084) | (4,082,180) | |||
Cash flows from financing activities | |||||
Payment of borrowings | (810,642) | (840,043) | |||
Payment of financial lease liability | (149,014) | (196,118) | |||
Payment of interests from borrowings | (600,974) | (594,665) | |||
Repurchase of corporate notes | (165,695) | (147,281) | |||
Acquisition of own shares | - | (682,002) | |||
Net cash flows used in financing activities | (1,726,325) | (2,460,109) | |||
Increase in cash and cash equivalents | 5,316,081 | 1,524,892 | |||
Cash and cash equivalents at the beginning of year | 14 | 465,775 | 48,268 | ||
Exchange differences in cash and cash equivalents | (77,617) | 57,524 | |||
Result from exposure to inflation | (25,706) | (4,639) | |||
Increase in cash and cash equivalents | 5,316,081 | 1,524,892 | |||
Cash and cash equivalents at the end of the period | 14 | 5,678,533 | 1,626,045 | ||
Supplemental cash flows information | |||||
Non-cash activities | |||||
Agreement on the Regularization of Obligations | - | 18,658,875 | |||
Adquisition of advances to suppliers, property, plant and equipment through increased trade payables | (453,929) | (928,237) | |||
Adquisition of advances to suppliers, right-of-use assets through increased trade payables | (87,847) | - |
The accompanying notes are an integral part of the Condensed Interim Financial Statements.
8 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 1 | General information |
History and development of the Company
edenor was organized on July 21, 1992 by Executive Order No. 714/92 in connection with the privatization and concession process of the distribution and sale of electric power carried out by SEGBA.
By means of an International Public Bidding, the PEN awarded 51% of the Company’s capital stock, represented by the Class "A" shares, to the bid made by EASA, the parent company of edenor at that time. The award as well as the transfer contract were approved on August 24, 1992 by Executive Order No. 1,507/92 of the PEN.
On September 1, 1992, EASA took over the operations of edenor.
As a consequence of the merger processes of EASA and its parent IEASA with and into CTLL, and, in turn, of the latter with and into PESA, formalized in 2018, at present, PESA is the controlling company of edenor.
The corporate purpose of edenor is to engage in the distribution and sale of electricity within the concession area. Furthermore, among other activities, the Company may subscribe or acquire shares of other electricity distribution companies, subject to the approval of the regulatory agency, assign the use of the network to provide electricity transmission or other voice, data and image transmission services, and render advisory, training, maintenance, consulting, and management services and know-how related to the distribution of electricity both in Argentina and abroad. These activities may be conducted directly by edenor or through subsidiaries or related companies. In addition, the Company may act as trustee of trusts created under Argentine laws.
The Company’s economic and financial situation
In the last fiscal year, the Company recorded negative working capital. This situation is due mainly to the suspension of the electricity rate adjustments since February 2019, and the constant increase of the operating costs necessary to maintain the level of service -whose transfer to tariffs, if applied, takes place only every six months-, the Argentine economy’s inflationary context, and the sustained recession since mid-2018. The Company has been significantly affected by the freeze on electricity rates, therefore, its revenues are at December 2018 values, in spite of the record high levels of inflation suffered over the last eighteen months and the uncertainty as to when the update of costs will be finally recognized. Additionally, this situation is exacerbated by the effects of the COVID-19 pandemic, which has had a severe social, economic and financial impact and whose long-term consequences are uncertain and difficult to assess for the global economy, for Argentina and, hence, for the Company, which is currently being affected by: (i) increases in the delinquency rate, due to the suspension of both due dates and disconnection actions, and the provision of electricity free of charge, all this for certain customer segments; (ii) the fall in demand as a consequence of a lower industrial activity, which is not offset by the increase recorded in residential consumption; (iii) the interruption of the chain of payments; and (iv) the constant increase in the levels of electricity theft.
The Company’s Board of Directors is currently assessing different alternatives aimed at obtaining the necessary funds to reverse the aforementioned effects.
9 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
This whole situation is aggravated by a complex and vulnerable economic context, as reflected by the country’s economic conditions described below:
o | 2.2% fall of the GDP in 2019 compared to 2018; |
o | Economic contraction by an estimated 10% for 2020 (IMF - World Economic Outlook Report), due to the loss of confidence, the tightening of credit requirements, and the effects of the COVID-19; |
o | Continuous increase of both public spending and fiscal deficit; |
o | High levels of inflation that are expected to remain high over time; |
Additionally, the enactment, by the end of 2019, of Law No. 27,541 on Social Solidarity and Production Reactivation in the framework of the Economic Emergency, whereby the PEN was authorized to keep electricity rates under federal jurisdiction unchanged for one hundred and eighty days, the ENRE’s instruction directing edenor not to increase its electricity rates, and the issuance on June 19, 2020 of Executive Order No. 543 that extended said period for another one hundred and eighty calendar days, postponing the update of the electricity rate schedule, impact directly on the Company’s financial soundness.
Despite the previously described situation, it is worth pointing out that, in general terms, the quality of the electricity distribution service has been significantly improved, both in duration and frequency of power cuts. In view of the continuous increase of the costs associated with the provision of the service, as well as the need for additional investments to meet the demand, the Company, as previously mentioned, is analyzing different measures aimed at mitigating the negative effects of this situation on its financial structure, minimizing the impact on the sources of employment, the execution of the investment plan, and the carrying out of the essential operation, maintenance and improvement-related works that are necessary to maintain the provision of the public service, object of the concession, in a satisfactory manner in terms of quality and safety. It is in this regard that the Company was forced to partially postpone payments to CAMMESA for energy purchased in the Wholesale Electricity Market (“MEM”) as from the maturities that have occurred since March 2020.
Taking into consideration that the realization of the measures necessary to reverse the manifested negative trend depends on the occurrence of certain events that are not under the Company’s control, the Board of Directors has raised substantial doubt about edenor’s ability to continue as a going concern, which may result in the Company’s being obliged to defer certain payment obligations or unable to meet expectations for salary increases or the increases recorded in third-party costs.
Nevertheless, these condensed interim financial statements have been prepared assuming that the Company will continue to operate as a going concern and do not include the effects of the adjustments or reclassifications that might result from the outcome of these uncertainties.
Note | 2 | Regulatory framework |
At the date of issuance of these condensed interim financial statements, there exist the following changes with respect to the situation reported by the Company in the Financial Statements as of December 31, 2019, mainly as a consequence of the public health emergency (Executive Orders issued on the grounds of Necessity and Urgency Nos. 260 and 287), due to the effects of the global pandemic, based on which, in Argentina, the PEN implemented a series of measures (Executive Orders issued on the grounds of Necessity and Urgency Nos. 297/2020, 325/2020, 355/2020, 408/2020, 459/2020, 493/2020, 520/2020, 576/2020, 605/2020 and 641/2020 and supplementary regulations) aimed at reducing the movement of the population, providing for the mandatory and preventive social isolation, in its different stages, as from March 20, allowing only for the movement of those individuals related to the provision of essential services and products, among which the electricity service provided by distribution companies, such as edenor, and the other companies comprising the energy production cycle is included.
10 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
At the date of issuance of these condensed interim financial statements the ending of the mandatory and preventive social isolation period, as well as its effects, is uncertain as it is dependent on the development of the pandemic.
a) | Intervention of the Regulatory Authority |
On March 16, 2020, by means of Executive Order No. 277/20, the PEN provided, within the framework of the public emergency and in accordance with the provisions of Law No. 27,541 on Social Solidarity and Production Reactivation, for the intervention of the ENRE until December 31, 2020.
b) | Regularization of Obligations |
Within the framework of the Agreement on the Regularization of Obligations, and based on the terms of the second clause thereof, as of June 30, 2020, the Company recorded the update, relating to the current period, of the amounts related to “penalties to be used for investments” for a total of $ 744 million, which have been charged to financial interest expense, totaling a liability pending application for $ 5,392.5 million.
c) | Effects related to the COVID-19 |
1. Suspension of customer service in commercial offices: on March 21, 2020, by means of Resolution No. 3/2020, the ENRE resolved to instruct distribution companies to: i) immediately suspend customer service, with the closure of all the commercial offices during the mandatory and preventive social isolation period; ii) implement an electronic system to deal with customer commercial proceedings/inquiries and claims; and iii) provide only for the movement of those human resources required for the continuity of the essential provision of the public service of electricity distribution in the technical and operational aspects of their respective areas.
2. Prohibition against the interruption of service provision: on March 25, 2020 the PEN issued Executive Order No. 311/2020 and its subsequent regulation, prohibiting utility companies from shutting off services to certain customers (detailed therein) as from March 1, 2020, during the period between April 24, 2020 and September 20, 2020. Additionally, the Order provides that the customers who have a prepaid system and do not pay for the recharges, will receive the service as normal and usual during that same period. The detailed aspects impact directly on the Company’s operations, its economic and financial situation, and outlook as the necessary resources to deal with those situations have not been defined.
3. System of payment for the service: by means of Resolution No. 173/2020 (which regulates DNU 311/2020, as amended by Executive Order 543/2020), on April 18, 2020, the Ministry of Productive Development provided that the consumers benefitted from the prohibition against the interruption of the service due to non-payment of up to three bills, mentioned in the preceding paragraph -this was modified by DNU No. 543/2020 that brought the total of unpaid bills to six-, may pay their unpaid bills for the electricity distribution service in up to 30 monthly, equal and consecutive installments with an interest rate to be determined by the application authority, with the first installment maturing on September 30, 2020. This resolution applies only to a specific group of customers, which is deemed to be in a more vulnerable situation, detailed in the resolution, and whose scope is still being defined by the application authority. Furthermore, the financing may be applied to the purchase of energy the Company makes from the MEM associated with these consumptions.
11 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
4. Consumption estimate: in the framework of the mandatory and preventive social isolation provided for by the PEN and the provisions of ENRE Resolution No. 3/2020, on April 13, 2020, the Regulatory Authority authorized the Company to apply the methodology for validating meter readings and consumption estimates (ENRE Resolution No. 209/2018), excluding the cases of remote readings and non-metered consumptions. Furthermore, the ENRE issued two instructions, one of them on April 30, 2020 and the other on May 5, 2020, in relation to the application of the aforementioned methodology, mainly with regard to the communication to be provided to Customers, the mechanisms for challenging meter readings and the information about this process to be provided on a periodical basis to the Regulatory Authority. Subsequently, on May 6, 2020, the ENRE authorized Distribution Companies to perform meter reading activities for the electricity consumption of medium and large demands, tariff 2 and 3.
In this regard, by means of Resolution No. 27/2020, the ENRE resolves that in the case of T1R (small-demand residential tariff) category customers with no remote meter reading, the lowest consumption recorded over the last three years prior to the issuance of the bill for the same estimated period is to be applied until actual meter readings are available.
Furthermore, by means of Resolution No. 35/2020, the ENRE resolves that T2 (medium-demand), T3 (large-demand) and Toll tariff category customers subject to compliance with the mandatory isolation, who have suffered a reduction of at least 50% in their demand for power, may either suspend payment or make partial payments on account of the contracted power under electricity supply contracts, until 70% of the demand is recovered, maintaining the obligation to pay the other charges.
Finally, on May 15, 2020, by means of note No. NO-2020-32411442, the ENRE instructs the Company to begin to carry out reading tasks of T1 (small-demand tariff) customers’ meters so that the billing reflects actual consumption.
In this regard, it is provided that if from the previous consumption estimate process a difference arises in favor of the customer, it must be reimbursed by the Company in the first bill with actual reading. Furthermore, if the difference is in favor of the Company, the resulting amount will have to be paid in 6 equal and consecutive installments, which will be included in the bills to be issued with the consumption recorded as from September 1, 2020. All this impacts on the Company’s economic and financial situation.
5. Freeze on electricity rates: on June 19, 2020, DNU No. 543/2020 was issued, whereby the authority to keep the electricity rates under federal jurisdiction unchanged was extended for an additional term of 180 calendar days.
d) Penalties
At the date of issuance of these condensed interim financial statements, the Company is complying with the payment of the six penalty-related installments, whose payment had been deferred by the Electricity Rate Schedule Mantenance Agreement entered into with the Federal Government on September 19, 2019. In this regard, the payment of the sixth and last installment of the aforementioned agreement was made in the first days of August of the current year.
Furthermore, on June 3, 2020, by means of Resolution No. 42/2020, the ENRE resolves to approve the new methodology for crediting and distributing the penalties payable to all the active customers, and the regulations of the methodology for crediting the penalties payable to disconnected customers, as well as the manner in which distribution companies must produce that information and send it to the ENRE. As of June 30, 2020, the penalties payable to active customers amounted to $ 150 million.
12 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 3 | Basis of preparation |
These condensed interim financial statements for the six-month period ended June 30, 2020 have been prepared in accordance with the provisions of IAS 34 “Interim Financial Reporting”, incorporated by the CNV.
These condensed interim financial statements for the six-month period ended June 30, 2020 have not been audited; they have been reviewed by the Independent Accountant in accordance with ISRE 2410, whose scope is substantially less than that of an audit performed in accordance with applicable auditing standards. The Company’s Management estimates that they include all the necessary adjustments to fairly present the results of operations for each period. The result of operations for the six-month period ended June 30, 2020 and its comparative period as of June 30, 2019 do not necessarily reflect the Company’s results in proportion to the full fiscal year. They were approved for issue by the Company’s Board of Directors on August 10, 2020.
Due to the mandatory lockdown ordered by the national authorities, the Company is unable to proceed with the transcription of these condensed interim financial statements to the pertinent registered books.
The condensed interim financial statements are measured in pesos (the legal currency in Argentina) restated in accordance with that mentioned in this Note, which is also the presentation currency.
These condensed interim financial statements must be read together with the audited Financial Statements as of December 31, 2019 prepared under IFRS.
The balances as of December 31 and for the six and three-month period ended June 30, 2019, as the case may be, disclosed in these condensed interim financial statements for comparative purposes, arise as a result of restating the annual Financial Statements and the Condensed Interim Financial Statements as of those dates to the purchasing power of the currency at June 30, 2020, as a consequence of the restatement of the financial information described hereunder.
Restatement of financial information
The condensed interim financial statements, including the figures relating to the previous year/period, have been stated in terms of the measuring unit current at June 30, 2020, in accordance with IAS 29 “Financial reporting in hyperinflationary economies”, using the BCRA Market Expectations Survey index for the last month of the period, inasmuch as the FACPCE index was not yet available at the closing date of the Company’s accounting processes.
The inflation rate applied for the period between January 1, 2020 and June 30, 2020, based on that indicated in the preceding paragraph, amounted to 13.7%. It does not cause significant distortions that, in the Company’s opinion, could affect the interpretation of these condensed interim financial statements or investor decisions if the definitive index established by the FACPCE, which was published subsequent to the closing of the Company’s accounting process, had been used.
Note | 4 | Accounting policies |
The accounting policies adopted for these condensed interim financial statements are consistent with those used in the preparation of the Financial Statements for the last financial year, which ended on December 31, 2019.
Accounting standards, amendments and interpretations issued by the IASB in the last few years, effective as of June 30, 2020 and adopted by the Company:
13 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
- IAS 1 “Presentation of financial statements” and IAS 8 “Accounting policies” (amended in October 2018). The amendment clarifies the definition of “material” for ease of understanding.
- IFRS 16 “Leases”, amended in May 2020. It permits lessors, as a practical expedient, not to assess whether a lease modification exists in the event of rent concessions occurring as a direct consequence of the COVID-19. It applies to annual periods beginning on or after 1 June 2020. The cumulative effect is recognized as an adjustment to the opening balance of retained earnings at the beginning of the period in which the amendment is first applied, with early adoption permitted.
- IFRS 17 “Insurance Contracts”, published in May 2017. It replaces IFRS 4 - an interim standard issued in 2004 that allowed entities to account for insurance contracts using their local accounting requirements, resulting in multiple application approaches. IFRS 17 establishes the principles for the recognition, measurement, presentation, and disclosure of insurance contracts, and applies to annual periods beginning on or after January 1, 2021, with early adoption permitted if entities also apply IFRS 9 and IFRS 15. The Company has not early adopted this standard.
- IAS 16 “Property, Plant and Equipment”, amended in May 2020. It eliminates the possibility of deducting from the cost of property, plant and equipment any proceeds from the sale of ítems produced while bringing the asset to the location, carrying out its installation process and preparing it for its intended use. It is applicable retrospectively from January 1, 2022, with early adoption permitted. The Company has not early adopted this standard.
- IAS 37 “Provisions, contingent liabilities and contingent assets”, amended in May 2020. It specifies that the unavoidable cost of fulfilling an onerous contract is the lower of the cost of fulfilling its provisions and the amount of any compensation or penalties arising from failure to fulfil it. It applies to annual periods beginning on or after January 1, 2022, with early adoption permitted. The Company has not early adopted this standard.
There are no new IFRS or IFRIC applicable as from this period that have a material impact on the Company’s condensed interim financial statements.
Note | 5 | Financial risk management |
Note | 5.1 | Financial risk factors |
The Company’s activities and the market in which it operates expose the Company to a series of financial risks: market risk (including currency risk, cash flows interest rate risk, fair value interest rate risk and price risk), credit risk and liquidity risk.
Additionally, the difficulty in obtaining financing in the international markets could affect some of the Company’s business variables, such as interest rates, foreign currency exchange rates and the access to sources of financing.
With regard to the Company’s risk management policies, there have been no significant changes since the last fiscal year end.
14 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
a. | Market risks |
i. | Currency risk |
As of June 30, 2020 and December 31, 2019, the Company’s balances in foreign currency are as follow:
Currency | Amount in foreign currency | Exchange rate (1) | Total 06.30.20 | Total 12.31.19 | ||||||
ASSETS | ||||||||||
CURRENT ASSETS | ||||||||||
Other receivables | USD | 6,213 | 70.460 | 437,768 | 68,097 | |||||
EUR | 2 | 79.267 | 159 | - | ||||||
CHF | 54,609 | 0.654 | 35,698 | - | ||||||
Financial assets at fair value through profit or loss | USD | - | 70.460 | - | 3,172,143 | |||||
Cash and cash equivalents | USD | 43,894 | 70.460 | 3,092,771 | 136,874 | |||||
EUR | 11 | 79.268 | 872 | 840 | ||||||
TOTAL CURRENT ASSETS | 3,567,268 | 3,377,954 | ||||||||
TOTAL ASSETS | 3,567,268 | 3,377,954 | ||||||||
LIABILITIES | ||||||||||
NON-CURRENT LIABILITIES | ||||||||||
Borrowings | USD | 135,359 | 70.460 | 9,537,411 | 9,320,704 | |||||
TOTAL NON-CURRENT LIABILITIES | 9,537,411 | 9,320,704 | ||||||||
CURRENT LIABILITIES | ||||||||||
Trade payables | USD | 6,588 | 70.460 | 464,204 | 616,504 | |||||
EUR | 212 | 79.267 | 16,805 | 32,410 | ||||||
CHF | - | 67.186 | - | 17,461 | ||||||
NOK | - | 7.356 | - | 530 | ||||||
Borrowings | USD | 15,025 | 70.460 | 1,058,691 | 1,886,597 | |||||
Other payables | USD | 9,087 | 70.460 | 640,270 | 618,726 | |||||
TOTAL CURRENT LIABILITIES | 2,179,970 | 3,172,228 | ||||||||
TOTAL LIABILITIES | 11,717,381 | 12,492,932 |
(1) | The exchange rates used are the BNA exchange rates in effect as of June 30, 2020 for US Dollars (USD), Euros (EUR), Swiss Francs (CHF) Norwegian Krones (NOK) and Japanese Yens (JPY). |
ii. | Fair value estimate |
The Company classifies the measurements of financial instruments at fair value using a fair value hierarchy that reflects the relevance of the variables used to carry out such measurements. The fair value hierarchy has the following levels:
· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
· Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from the prices).
· Level 3: inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
The table below shows the Company’s financial assets and liabilities measured at fair value as of June 30, 2020 and December 31, 2019:
15 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
LEVEL 1 | LEVEL 2 | TOTAL | ||||
At June 30, 2020 | ||||||
Assets | ||||||
Cash and cash equivalents: | ||||||
Money market funds | 3,231,003 | - | 3,231,003 | |||
Total assets | 3,231,003 | - | 3,231,003 | |||
Liabilities | ||||||
Derivative financial instruments | - | 3,790 | 3,790 | |||
Total liabilities | - | 3,790 | 3,790 | |||
At December 31, 2019 | ||||||
Assets | ||||||
Financial assets at fair value through profit or loss: | ||||||
Money market funds | 3,172,115 | - | 3,172,115 | |||
Cash and cash equivalents | ||||||
Money market funds | 283,916 | - | 283,916 | |||
Total assets | 3,456,031 | - | 3,456,031 | |||
Liabilities | ||||||
Derivative financial instruments | - | 233,370 | 233,370 | |||
Total liabilities | - | 233,370 | 233,370 |
iii. | Interest rate risk |
Interest rate risk is the risk of fluctuation in the fair value or cash flows of an instrument due to changes in market interest rates. The Company’s exposure to interest rate risk is mainly related to its long-term debt obligations.
Indebtedness at floating rates exposes the Company to interest rate risk on its cash flows. Indebtedness at fixed rates exposes the Company to interest rate risk on the fair value of its liabilities. As of June 30, 2020 and December 31, 2019 all the loans were obtained at fixed interest rates, except for a loan applied for by the Company and granted by ICBC Bank as from October 2017 for a three-year term at a six-month libor rate plus an initial 2.75% spread, which will be adjusted semi-annually by a quarter-point. The Company’s policy is to keep the largest percentage of its indebtedness in instruments that accrue interest at fixed rates.
Note | 6 | Critical accounting estimates and judgments |
The preparation of the condensed interim financial statements requires the Company’s Management to make estimates and assessments concerning the future, exercise critical judgments and make assumptions that affect the application of the accounting policies and the reported amounts of assets and liabilities and revenues and expenses.
These estimates and judgments are permanently evaluated and are based upon past experience and other factors that are reasonable under the existing circumstances. Future actual results may differ from the estimates and assessments made at the date of preparation of these condensed interim financial statements, mainly under the current circumstances posed by the COVID-19 pandemic mentioned in Notes 1 and 2, which could affect the Company’s operations and the judgment exercised by Management in each and every aspect related to predictive situations.
In the preparation of these condensed interim financial statements, there were no changes in either the critical judgments made by the Company when applying its accounting policies or the information sources of estimation uncertainty with respect to those applied in the Financial Statements for the year ended December 31, 2019, except for certain parameters that are described below:
16 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
a. | Impairment of long-lived assets |
The Company analyzes the recoverability of its long-lived assets on a periodical basis or when events or changes in circumstances indicate that the recoverable amount of assets, which is measured as the higher of value in use and fair value less costs to sell at the end of the period, may be impaired.
Due to that described in Note 1, and taking into consideration the impacts on the Company’s economic and financial equation, the projections made by edenor at December 31, 2019 have been updated at March 31, 2020, there being no new indicators showing that an impairment may exist concerning the recoverability of its property, plant and equipment.
The value in use is determined on the basis of projected and discounted cash flows, using discount rates that reflect the time value of money and the specific risks of the assets under consideration.
Cash flows are prepared based on estimates concerning the future performance of certain variables that are sensitive to the determination of the recoverable amount, among which the following can be noted: (i) nature, timing, and modality of the electricity rate increases and/or recognition of cost adjustments; (ii) demand for electricity projections; (iii) development of the costs to be incurred; (iv) investment needs appropriate to the service quality levels required by the Regulatory authority, and (v) macroeconomic variables, such as, growth rates, inflation rates and foreign currency exchange rates, among others.
The Company has made its projections under the assumption that in the next few years it will obtain the delayed electricity rates updates to which it is entitled in accordance with the applicable regulations, using a Discount rate (WACC) in dollars of 12.67% and taking into account the following effects resulting from the situation mentioned in Note 1:
• Decrease in demand of 15% for the months of April, May and June; 10% for the month of July, and 5% for the months of August, September and October 2020, compared to the average demand recorded in the last few months;
• Decrease in collections of 40% for the months of April, May and June; 25% for the month of July, and 10% for the months of August, September and October 2020;
• Reduction of 8% and 16% in operating expenses and capital expenditures, respectively.
However, given the complexity of the country’s macroeconomic scenario, exacerbated by the effects of the pandemic, the Company’s Management is not in a position to ensure that the future performance of the assumptions used in making its projections will be in line with what it has estimated at the date of preparation of these condensed interim financial statements.
In order to consider the estimation risk included in the projections of the aforementioned variables, the Company has taken into consideration three alternative probability-weighted scenarios, which are detailed below:
a) | Scenario called Optimistic scenario: the Company forecasts that the CPD increases will be transferred to tariffs as from January 2021. Furthermore, as from that date, the outstanding balances, net of the debt with the MEM generated in 2020 plus interest and updates, would begin to be recovered in 12 monthly installments. Additionally, from February 2021 the CPD adjustments related to each period would be transferred to tariffs. As from February 2022, a new RTI period would come into effect, which would imply a redefinition of revenues to face larger investments and an increase in the level of activity. Probability of occurrence assigned 5%. |
17 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
b) | Scenario called Intermediate scenario: the Company forecasts that the CPD increases will be transferred to tariffs in January 2021, July 2021 and January 2022. Furthermore, in January 2021, the outstanding balances, net of the debt with the MEM generated in 2020 plus interest and updates, would begin to be recovered in 18 monthly installments (estimated average of installments – Note 2.c.3). Additionally, from February 2021 the CPD adjustments related to each period would be transferred to tariffs. Probability of occurrence assigned 70%. |
c) | Scenario called Pessimistic scenario: The RTI would be breached. Moreover, the Company forecasts that 80% of the CPD increases will be transferred to tariffs in January 2022 and January 2023. Furthermore, in January 2022, 80% of the outstanding balances, net of the debt with the MEM generated in 2020 plus interest and updates, would begin to be recovered in 18 monthly installments (estimated average of installments – Note 2.c.3). As from February 2021, 80% of the CPD adjustments related to each period would be transferred to tariffs. Probability of occurrence assigned 25%. |
The Company has assigned to these three scenarios the previously described probability of occurrence percentages based mainly on experience and giving consideration to the current economic and financial situation.
At the date of these condensed interim financial statements, the demand and collection indicators used for the test for recoverability of long-lived fixed assets carried out as of March 31, 2020 have improved, which allows the Company to conclude that there are no new indicators showing that an impairment may exist.
Note | 7 | Contingencies and lawsuits |
At the date of issuance of these condensed interim financial statements, the variation recorded in the United States dollar exchange rate and, mainly, the significant decrease recorded in interest rates compared to the fiscal year ended December 31, 2019, as a consequence of a combination of external factors and the local macroeconomic context, have resulted in a decrease as of June 30, 2020 in the Company’s estimates of the amounts related to the different contingencies and lawsuits. Note 23.
18 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 8 | Property, plant and equipment |
|
Lands and buildings | Substations | High, medium and low voltage lines | Meters and Transformer chambers and platforms | Tools, Furniture, vehicles, equipment, communications and advances to suppliers | Construction in process | Supplies and spare parts | Total | |||||||||
At 12.31.19 | ||||||||||||||||
Cost | 2,719,461 | 25,056,019 | 71,332,462 | 30,391,887 | 4,548,033 | 25,701,249 | 276,376 | 160,025,487 | ||||||||
Accumulated depreciation | (520,126) | (7,802,533) | (23,460,146) | (10,184,193) | (2,879,413) | - | - | (44,846,411) | ||||||||
Net amount | 2,199,335 | 17,253,486 | 47,872,316 | 20,207,694 | 1,668,620 | 25,701,249 | 276,376 | 115,179,076 | ||||||||
Additions | 9,302 | 929,256 | 15,156 | 76,833 | 145,918 | 2,683,790 | 86,371 | 3,946,626 | ||||||||
Disposals | - | (1,282) | (11,339) | (47,403) | - | - | - | (60,024) | ||||||||
Transfers | 150,707 | 2,895,747 | 2,265,904 | 1,904,177 | 151,887 | (7,275,048) | (93,374) | - | ||||||||
Depreciation for the period | (33,955) | (464,503) | (1,273,995) | (641,746) | (321,441) | - | - | (2,735,640) | ||||||||
Net amount 06.30.20 | 2,325,389 | 20,612,704 | 48,868,042 | 21,499,555 | 1,644,984 | 21,109,991 | 269,373 | 116,330,038 | ||||||||
At 06.30.20 | ||||||||||||||||
Cost | 2,879,469 | 28,877,686 | 73,549,079 | 32,309,116 | 4,845,838 | 21,109,991 | 269,373 | 163,840,552 | ||||||||
Accumulated depreciation | (554,080) | (8,264,982) | (24,681,037) | (10,809,561) | (3,200,854) | - | - | (47,510,514) | ||||||||
Net amount | 2,325,389 | 20,612,704 | 48,868,042 | 21,499,555 | 1,644,984 | 21,109,991 | 269,373 | 116,330,038 |
· | During the period ended June 30, 2020, the Company capitalized as direct own costs $ 593.2 million. |
· | Includes $ 923.1 million in additions, related to a 500/220 kW - 800 MVA transformer bank in General Rodriguez transformer station (section 8, item 8.2 of the agreement entered into by the Company, the BICE bank and CAMMESA on April 24, 2014); with a contra-account in Deferred revenue. |
19 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Lands and buildings | Substations | High, medium and low voltage lines | Meters and Transformer chambers and platforms | Tools, Furniture, vehicles, equipment, communications and advances to suppliers | Construction in process | Supplies and spare parts | Total | |||||||||
At 12.31.18 | ||||||||||||||||
Cost | 2,534,021 | 24,073,071 | 66,542,782 | 27,534,887 | 4,644,616 | 23,444,719 | 341,453 | 149,115,549 | ||||||||
Accumulated depreciation | (426,235) | (6,948,074) | (21,280,908) | (9,023,410) | (2,211,814) | - | - | (39,890,441) | ||||||||
Net amount | 2,107,786 | 17,124,997 | 45,261,874 | 18,511,477 | 2,432,802 | 23,444,719 | 341,453 | 109,225,108 | ||||||||
Additions | 6,859 | 1,816 | 9,678 | 120,578 | 494,087 | 5,620,694 | 128,316 | 6,382,028 | ||||||||
Disposals | - | - | (2,379) | (46,082) | - | - | - | (48,461) | ||||||||
Transfers | 180,444 | 913,637 | 2,199,112 | 1,266,780 | (607,839) | (3,656,369) | (295,765) | - | ||||||||
Depreciation for the period | (57,980) | (432,593) | (1,244,577) | (590,394) | (351,862) | - | - | (2,677,406) | ||||||||
Net amount 06.30.19 | 2,237,109 | 17,607,857 | 46,223,708 | 19,262,359 | 1,967,188 | 25,409,044 | 174,004 | 112,881,269 | ||||||||
At 06.30.19 | ||||||||||||||||
Cost | 2,721,325 | 24,988,526 | 68,642,709 | 28,856,398 | 4,530,864 | 25,409,044 | 174,004 | 155,322,870 | ||||||||
Accumulated depreciation | (484,216) | (7,380,669) | (22,419,001) | (9,594,039) | (2,563,676) | - | - | (42,441,601) | ||||||||
Net amount | 2,237,109 | 17,607,857 | 46,223,708 | 19,262,359 | 1,967,188 | 25,409,044 | 174,004 | 112,881,269 |
· | During the period ended June 30, 2019, the Company capitalized as direct own costs $ 753.8 million. |
20 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 9 | Right-of-use asset |
The leases recognized as right-of-use assets in accordance with IFRS 16 are disclosed below:
06.30.20 | 12.31.19 | ||
Total right-of-use asset by leases | 257,419 | 296,693 |
The development of right-of-use assets is as follows:
06.30.20 | 12.31.19 | ||
Balance at beginning of year | 251,894 | - | |
Incorporation by adoption of IFRS 16 | - | 479,815 | |
Increase | 87,846 | 3,482 | |
Payments | (149,014) | (241,508) | |
Exchange difference and gain on net monetary position | 161,274 | 10,105 | |
Balance at end of the period | 352,000 | 251,894 |
Note | 10 | Other receivables |
Note | 06.30.20 | 12.31.19 | |||
Non-current: | |||||
Financial credit | 18,040 | 25,170 | |||
Related parties | 29.d | 3,576 | 4,429 | ||
Credit for Real estate asset | 31 | 21,138 | - | ||
RDSA credit | 2,125,890 | 2,417,195 | |||
Allowance for the impairment of other receivables (1) | (2,125,890) | (2,417,195) | |||
Total non-current | 42,754 | 29,599 | |||
Current: | |||||
Prepaid expenses | 62,519 | 17,288 | |||
Credit for Real estate asset | 31 | 42,276 | 68,097 | ||
Advances to suppliers | 22,506 | 281 | |||
Advances to personnel | 1,722 | - | |||
Security deposits | 32,105 | 28,354 | |||
Financial credit | 22,407 | 50,895 | |||
Receivables from electric activities | 123,812 | 114,122 | |||
Related parties | 29.d | 63,671 | 29,297 | ||
Guarantee deposits on derivative financial instruments | 81,996 | - | |||
Judicial deposits | 71,347 | 78,018 | |||
Tax credits | 21,553 | 17,258 | |||
Other | 889 | 76 | |||
Allowance for the impairment of other receivables | (45,644) | (74,302) | |||
Total current | 501,159 | 329,384 |
The value of the Company’s other financial receivables approximates their fair value.
The other non-current receivables are measured at amortized cost, which does not differ significantly from their fair value.
21 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
The roll forward of the allowance for the impairment of other receivables is as follows:
06.30.20 | 06.30.19 | ||||
Balance at beginning of year | 2,491,497 | 135,139 | |||
Increase | 45,410 | 13,957 | |||
Result from exposure to inlfation | (299,407) | (24,376) | |||
Recovery | (65,966) | (23,983) | |||
Balance at end of the period | 2,171,534 | 100,737 |
Note | 11 | Trade receivables |
06.30.20 | 06.30.19 | ||||
Current: | |||||
Sales of electricity – Billed | 10,395,152 | 8,771,074 | |||
Sales of electricity – Unbilled | 6,286,597 | 6,585,696 | |||
PBA & CABA government credit (1) | 203,142 | 285,803 | |||
Framework Agreement | 9,003 | 10,237 | |||
Fee payable for the expansion of the transportation and others | 25,041 | 28,478 | |||
Receivables in litigation | 214,047 | 244,330 | |||
Allowance for the impairment of trade receivables | (3,138,477) | (1,758,175) | |||
Total current | 13,994,505 | 14,167,443 |
(1) | As disclosed in Note 2.e) to the Financial Statements as of December 31, 2019, the Province of Buenos Aires and the Federal Government have a debt with the Company, for the consumption of electricity by low-income neighborhoods and shantytowns, which as of June 30, 2020 amounts to a total of $ 1,785.1 million, related to the October 2017-June 2020 period. The indicated amount does not include interest and no revenue for this concept has been recognized by the Company. |
The value of the Company’s trade receivables approximates their fair value.
The roll forward of the allowance for the impairment of trade receivables is as follows:
06.30.20 | 06.30.19 | ||||
Balance at beginning of the year | 1,758,175 | 1,575,668 | |||
Increase | 1,925,190 | 590,121 | |||
Decrease | (316,714) | (279,003) | |||
Result from exposure to inlfation | (228,174) | (288,671) | |||
Balance at end of the period | 3,138,477 | 1,598,115 |
Note | 12 | Financial assets at fair value through profit or loss |
06.30.20 | 12.31.19 | ||||
Current | |||||
Money market funds | - | 3,172,115 | |||
Total current | - | 3,172,115 |
Note | 13 | Inventories |
22 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
06.30.20 | 12.31.19 | |||
Current | ||||
Supplies and spare-parts | 1,922,417 | 2,108,428 | ||
Advance to suppliers | 46,822 | 82,465 | ||
Total inventories | 1,969,239 | 2,190,893 |
Note | 14 | Cash and cash equivalents |
06.30.20 | 12.31.19 | 06.30.19 | ||||
Cash and banks | 2,447,530 | 181,859 | 142,860 | |||
Money market funds | 3,231,003 | 283,916 | 1,483,185 | |||
Total cash and cash equivalents | 5,678,533 | 465,775 | 1,626,045 |
Note | 15 | Share capital and additional paid-in capital |
Share capital | Additional paid-in capital | Total | ||||
Balance at June 30, 2020 and December 31, 2019 | 31,816,789 | 420,690 | 32,237,479 |
As of June 30, 2020, the Company’s share capital amounts to 906,455,100 shares, divided into 462,292,111 common, book-entry Class A shares with a par value of one peso each and the right to one vote per share; 442,210,385 common, book-entry Class B shares with a par value of one peso each and the right to one vote per share; and 1,952,604 common, book-entry Class C shares with a par value of one peso each and the right to one vote per share.
Note | 16 | Allocation of profits |
The restrictions on the distribution of dividends by the Company are those provided for by the Business Organizations Law and the negative covenants established by the Corporate Notes program. As of June 30, 2020, the Company complies with the indebtedness ratio established in such program.
If the Company’s Debt Ratio were higher than 3, the negative covenants included in the Corporate Notes program, which establish, among other issues, the Company’s impossibility to make certain payments, such as dividends, would apply.
Additionally, in accordance with Title IV, Chapter III, section 3.11.c of the CNV, the amounts subject to distribution will be restricted to the amount equivalent to the acquisition cost of the Company’s own shares.
Note | 17 | Trade payables |
23 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 06.30.20 | 12.31.19 | |||
Non-current | |||||
Customer guarantees | 243,815 | 242,298 | |||
Customer contributions | 200,536 | 177,893 | |||
Total non-current | 444,351 | 420,191 | |||
Current | |||||
Payables for purchase of electricity - CAMMESA | 11,430,974 | 4,965,547 | |||
Provision for unbilled electricity purchases - CAMMESA | 6,285,636 | 5,615,014 | |||
Suppliers | 3,440,913 | 3,458,928 | |||
Advance to customer | 331,076 | 324,100 | |||
Customer contributions | 31,103 | 35,087 | |||
Discounts to customers | 37,372 | 42,493 | |||
Total current | 21,557,074 | 14,441,169 |
The fair values of non-current customer contributions as of June 30, 2020 and December 31, 2019 amount to $ 56.8 million and $ 51.3 million, respectively. The fair values are determined based on estimated discounted cash flows in accordance with a representative market rate for this type of transactions. The applicable fair value category is Level 3 category.
The value of the rest of the financial liabilities included in the Company’s trade payables approximates their fair value.
Note | 18 | Other payables |
Note | 06.30.20 | 12.31.19 | |||
Non-current | |||||
ENRE penalties and discounts | 5,392,458 | 4,471,102 | |||
Financial Lease Liability (1) | 113,527 | 99,331 | |||
Total Non-current | 5,505,985 | 4,570,433 | |||
Current | |||||
ENRE penalties and discounts | 2,654,889 | 3,850,750 | |||
Related parties | 29.d | 9,532 | 14,288 | ||
Advances for works to be performed | 6,127 | 6,976 | |||
Payment agreements with ENRE | 28,237 | 54,845 | |||
Financial Lease Liability (1) | 238,473 | 152,563 | |||
Other | 3,669 | 10,030 | |||
Total Current | 2,940,927 | 4,089,452 |
The value of the Company’s other financial payables approximates their fair value.
(1) | The development of the financial lease liability is as follows: |
06.30.20 | 12.31.19 | ||
Balance at beginning of year | 251,894 | - | |
Incorporation by adoption of IFRS 16 | - | 479,815 | |
Increase | 87,846 | 3,482 | |
Payments | (149,014) | (241,508) | |
Exchange difference and gain on net monetary position | 161,274 | 10,105 | |
Balance at end of the period | 352,000 | 251,894 |
Note | 19 | Borrowings |
24 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
06.30.20 | 12.31.19 | |||
Non-current | ||||
Corporate notes (1) | 9,537,411 | 9,320,704 | ||
Total non-current | 9,537,411 | 9,320,704 | ||
Current | ||||
Interest from corporate notes | 166,743 | 163,120 | ||
Borrowing | 891,948 | 1,723,477 | ||
Total current | 1,058,691 | 1,886,597 |
(1) | Net of debt issuance, repurchase and redemption expenses. |
The fair values of the Company’s non-current borrowings as of June 30, 2020 and December 31, 2019 amount approximately to $ 8,408.3 million and $ 9,036.3 million, respectively. Such values were determined on the basis of the estimated market price of the Company’s Corporate Notes at the end of the period/year. The applicable fair value category is Level 1 category.
Subsequent to the closing date of these condensed interim financial statements, through successive market transactions, the Company has repurchased Corporate Notes for a total of United States dollars 22.1 million nominal value, which is equivalent to $ 1,585.5 million.
Note | 20 | Salaries and social security taxes payable |
06.30.20 | 12.31.19 | |||
Non-current | ||||
Early retirements payable | 33,926 | 44,907 | ||
Seniority-based bonus | 275,417 | 228,628 | ||
Total non-current | 309,343 | 273,535 | ||
Current | ||||
Salaries payable and provisions | 1,568,216 | 2,392,725 | ||
Social security payable | 589,416 | 312,208 | ||
Early retirements payable | 26,091 | 31,951 | ||
Total current | 2,183,723 | 2,736,884 |
The value of the Company’s salaries and social security taxes payable approximates their fair value.
Note | 21 | Income tax and deferred tax |
06.30.20 | 12.31.19 | |||
Current | ||||
Tax payable 2019 | 740,654 | 3,302,146 | ||
Provision of income tax payable | 367,199 | - | ||
Tax withholdings | (69,083) | (1,062,871) | ||
Total current | 1,038,770 | 2,239,275 |
The detail of deferred tax assets and liabilities is as follows:
25 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
06.30.20 | 12.31.19 | ||
Deferred tax assets | |||
Trade receivables and other receivables | 900,044 | 629,907 | |
Trade payables and other payables | 713,337 | 683,935 | |
Salaries and social security payable | 200,684 | 129,096 | |
Benefit plans | 108,182 | 123,006 | |
Tax liabilities | 18,115 | 20,036 | |
Provisions | 688,539 | 764,766 | |
Deferred tax asset | 2,628,901 | 2,350,746 | |
Deferred tax liabilities | |||
Property, plants and equipments | (22,525,526) | (22,334,996) | |
Financial assets at fair value through profit or loss | (275,863) | (236,697) | |
Borrowings | (2,889) | (3,931) | |
Adjustment effect on tax inflation | (2,769,125) | (2,578,171) | |
Deferred tax liability | (25,573,403) | (25,153,795) | |
Net deferred tax assets | (22,944,502) | (22,803,049) |
The detail of the income tax expense is as follows:
06.30.20 | 06.30.19 | |||
Deferred tax | (141,453) | (4,708,649) | ||
Current tax | (367,199) | (4,478,756) | ||
Difference between provision and tax return | (60,174) | (126,197) | ||
Income tax expense | (568,826) | (9,313,602) |
06.30.20 | 06.30.19 | |||
Profit for the period before taxes | (1,226,813) | 24,776,155 | ||
Applicable tax rate | 30% | 30% | ||
Result for the period at the tax rate | 368,044 | (7,432,847) | ||
Gain on net monetary position | (507,932) | (1,181,736) | ||
Income tax expense | 575,653 | 706,419 | ||
Adjustment effect on tax inflation | (940,803) | (1,387,974) | ||
Difference between provision and tax return | (63,788) | (17,464) | ||
Income tax expense | (568,826) | (9,313,602) |
Note | 22 | Tax liabilities |
06.30.20 | 12.31.19 | |||
Non-current | ||||
Current | ||||
Provincial, municipal and federal contributions and taxes | 251,717 | 203,556 | ||
VAT payable | 897,264 | 1,480,458 | ||
Tax withholdings | 133,707 | 167,214 | ||
SUSS withholdings | 6,761 | 9,586 | ||
Municipal taxes | 153,424 | 156,649 | ||
Total current | 1,442,873 | 2,017,463 |
Note | 23 | Provisions |
26 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Non-current liabilities | Current liabilities | |||
Contingencies | ||||
At 12.31.19 | 2,345,237 | 243,137 | ||
Increases | 186,163 | 17,846 | ||
Decreases | (49,695) | 14,461 | ||
Recovery | (114,212) | - | ||
Result from exposure to inflation for the period | (276,519) | (30,211) | ||
At 06.30.20 | 2,090,974 | 245,233 | ||
At 12.31.18 | 1,870,948 | 327,693 | ||
Increases | 877,352 | 22,951 | ||
Decreases | (99,001) | 28,022 | ||
Result from exposure to inflation for the period | (342,771) | (60,036) | ||
At 06.30.19 | 2,306,528 | 318,630 |
Note | 24 | Revenue from sales |
06.30.20 | 06.30.19 | ||
Sales of electricity | 39,510,277 | 50,810,169 | |
Right of use on poles | 159,436 | 175,602 | |
Connection charges | 22,377 | 33,494 | |
Reconnection charges | 3,844 | 16,039 | |
Total Revenue from sales | 39,695,934 | 51,035,304 |
27 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 25 | Expenses by nature |
The detail of expenses by nature is as follows:
Expenses by nature at 06.30.20 | ||||||||
Description | Transmission and distribution expenses | Selling expenses | Administrative expenses | Total | ||||
Salaries and social security taxes | 3,300,595 | 522,732 | 680,335 | 4,503,662 | ||||
Pension plans | 198,677 | 31,466 | 40,952 | 271,095 | ||||
Communications expenses | 54,149 | 188,909 | 307 | 243,365 | ||||
Allowance for the impairment of trade and other receivables | - | 1,904,634 | - | 1,904,634 | ||||
Supplies consumption | 830,512 | - | 73,520 | 904,032 | ||||
Leases and insurance | 265 | 157 | 125,192 | 125,614 | ||||
Security service | 113,633 | 17,984 | 11,695 | 143,312 | ||||
Fees and remuneration for services | 1,561,607 | 790,240 | 542,975 | 2,894,822 | ||||
Public relations and marketing | - | 11,754 | - | 11,754 | ||||
Advertising and sponsorship | - | 6,055 | - | 6,055 | ||||
Reimbursements to personnel | 9 | 77 | 394 | 480 | ||||
Depreciation of property, plants and equipments | 2,151,868 | 320,667 | 263,105 | 2,735,640 | ||||
Depreciation of right-of-use asset | 12,712 | 25,424 | 88,984 | 127,120 | ||||
Directors and Supervisory Committee members’ fees | - | - | 14,830 | 14,830 | ||||
ENRE penalties | 169,369 | 155,669 | - | 325,038 | ||||
Taxes and charges | - | 588,611 | 27,144 | 615,755 | ||||
Other | 182 | 102 | 3,672 | 3,956 | ||||
At 06.30.20 | 8,393,578 | 4,564,481 | 1,873,105 | 14,831,164 |
(1) Includes recovery of technical service quality-related penalties for $ 366.7 million.
The expenses included in the chart above are net of the Company’s own expenses capitalized in Property, plant and equipment as of June 30, 2020 for $ 593.2 million.
Expenses by nature at 06.30.19 | ||||||||
Description | Transmission and distribution expenses | Selling expenses | Administrative expenses | Total | ||||
Salaries and social security taxes | 3,509,957 | 580,810 | 777,861 | 4,868,628 | ||||
Pension plans | 149,088 | 24,670 | 33,040 | 206,798 | ||||
Communications expenses | 60,495 | 211,906 | 11,832 | 284,233 | ||||
Allowance for the impairment of trade and other receivables | - | 580,095 | - | 580,095 | ||||
Supplies consumption | 960,928 | - | 83,497 | 1,044,425 | ||||
Leases and insurance | 387 | - | 122,888 | 123,275 | ||||
Security service | 185,525 | 34,860 | 35,920 | 256,305 | ||||
Fees and remuneration for services | 1,509,759 | 898,481 | 691,333 | 3,099,573 | ||||
Public relations and marketing | - | 36,348 | - | 36,348 | ||||
Advertising and sponsorship | - | 18,725 | - | 18,725 | ||||
Reimbursements to personnel | 54 | 119 | 481 | 654 | ||||
Depreciation of property, plants and equipments | 2,106,061 | 313,841 | 257,504 | 2,677,406 | ||||
Depreciation of right-of-use asset | 21,875 | 21,875 | 21,875 | 65,625 | ||||
Directors and Supervisory Committee members’ fees | - | - | 14,960 | 14,960 | ||||
ENRE penalties | 1,348,565 | 1,401,345 | - | 2,749,910 | ||||
Taxes and charges | - | 469,563 | 30,464 | 500,027 | ||||
Other | 575 | 230 | 3,018 | 3,823 | ||||
At 06.30.19 | 9,853,269 | 4,592,868 | 2,084,673 | 16,530,810 |
The expenses included in the chart above are net of the Company’s own expenses capitalized in Property, plant and equipment as of June 30, 2019 for $ 753.8 million.
28 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 26 | Other operating expense, net |
Note | 06.30.20 | 06.30.19 | |||
Other operating income | |||||
Services provided to third parties | 109,589 | 108,838 | |||
Commissions on municipal taxes collection | 86,166 | 69,718 | |||
Related parties | 29.a | 41,905 | 57,103 | ||
Income from non-reimbursable customer contributions | 4,997 | 4,124 | |||
Other | 37,764 | 116,624 | |||
Total other operating income | 327,985 | 356,407 | |||
Other operating expense | |||||
Gratifications for services | (25,569) | (49,983) | |||
Cost for services provided to third parties | (39,260) | (54,828) | |||
Severance paid | (9,670) | (12,279) | |||
Debit and Credit Tax | (346,511) | (444,893) | |||
Recovery (Provision) for contingencies (1) | (89,797) | (900,303) | |||
Disposals of property, plant and equipment | (60,024) | (48,461) | |||
Refund of fines to suppliers | - | - | |||
Other | (7,374) | (2,051) | |||
Total other operating expense | (578,205) | (1,512,798) | |||
Other operating expense, net | (250,220) | (1,156,391) |
(1) | As of June 30, 2020 includes a recovery of the estimated amount of the provision for $ 114.2 million (see note 7). |
Note | 27 | Net finance costs |
06.30.20 | 06.30.19 | ||
Financial income | |||
Commercial interest | 631,249 | 588,115 | |
Total financial income | 631,249 | 588,115 | |
Finance costs | |||
Interest and other | (1,513,781) | (1,506,541) | |
Fiscal interest | (71,735) | (3,659) | |
Commercial interest | (1,348,830) | (2,997,012) | |
Bank fees and expenses | (2,952) | (1,287) | |
Total finance costs | (2,937,298) | (4,508,499) | |
Other financial results | |||
Exchange differences | (1,371,216) | (1,007,358) | |
Adjustment to present value of receivables | (74,760) | 12,287 | |
Changes in fair value of financial assets | 62,863 | 445,141 | |
Net gain from the repurchase of Corporate Notes | 44,483 | (2,641) | |
Other finance costs | (77,648) | (78,422) | |
Total other finance costs | (1,416,278) | (630,993) | |
Total net finance costs | (3,722,327) | (4,551,377) |
29 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 28 | Basic and diluted earnings per share |
Basic
The basic (loss) earnings per share is calculated by dividing the (loss) profit attributable to the holders of the Company’s equity instruments by the weighted average number of common shares outstanding as of June 30, 2020 and 2019, excluding common shares purchased by the Company and held as treasury shares.
The basic (loss) earnings per share coincides with the diluted (loss) earnings per share, inasmuch as the Company has issued neither preferred shares nor Corporate Notes convertible into common shares.
06.30.20 | 06.30.19 | |||
Profit for the year attributable to the owners of the Company | (1,795,639) | 15,462,553 | ||
Weighted average number of common shares outstanding | 875,074 | 875,074 | ||
Basic and diluted profit earnings per share – in pesos (*) | (2.05) | 17.67 |
(*) As of June 30, 2019, includes the result of the Agreement on the Regularization of Obligations.
Note | 29 | Related-party transactions |
The following transactions were carried out with related parties:
a. | Income |
Company | Concept | 06.30.20 | 06.30.19 | |||
PESA | Impact study | 2,512 | 958 | |||
SACDE | Reimbursement expenses | 39,393 | 56,145 | |||
41,905 | 57,103 |
b. | Expense |
Company | Concept | 06.30.20 | 06.30.19 | |||
PESA | Technical advisory services on financial matters | (84,900) | (79,298) | |||
SACME | Operation and oversight of the electric power transmission system | (48,524) | (51,071) | |||
OSV | Hiring life insurance for staff | (11,142) | (4,928) | |||
FIDUS | Legal fees | (3,206) | - | |||
ABELOVICH, POLANO & ASOC. | Legal fees | (359) | (965) | |||
(148,131) | (136,262) |
30 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
c. | Key Management personnel’s remuneration |
06.30.20 | 06.30.19 | |||
Salaries | 138,159 | 176,843 |
The balances with related parties are as follow:
d. | Receivables and payables |
06.30.20 | 12.31.19 | |||
Other receivables - Non current | ||||
SACME | 3,576 | 4,429 | ||
3,576 | 4,429 | |||
Other receivables - Current | ||||
SACDE | 37,905 | - | ||
FIDUS SGR | 25,000 | 28,426 | ||
SACME | 766 | 871 | ||
63,671 | 29,297 |
Other payables | ||||
SACME | (9,532) | (14,288) | ||
(9,532) | (14,288) |
Note | 30 | Ordinary and Extraordinary Shareholders’ Meeting |
The Company Ordinary and Extraordinary Shareholders’ Meeting held on April 28, 2020 resolved, among other issues, the following:
- | To approve edenor’s Annual Report and Financial Statements as of December 31, 2019; |
- | To allocate the $ 13,088.1 million profit for the year ended December 31, 2019 (at the purchasing power of the currency at June 30, 2020 amounts to $ 13,796.8 million) to the: |
· | Statutory reserve: $ 654.4 million (at the purchasing power of the currency at June 30, 2020 amounts to $ 689.8 million); |
· | Discretionary reserve: $ 12,433.7 million (at the purchasing power of the currency at June 30, 2020 amounts to $ 13,107.0 million) under the terms of section 70, 3rd paragraph, of Business Organizations Law No. 19,550. |
- | To approve the actions taken by the Directors and Supervisory Committee members, together with their respective remunerations; |
- | To appoint the authorities and the external auditors for the current fiscal year; |
- | To approve the amendment of Sections Nos. 13, 19, 23, 25 and 33 of the By-laws, subject to the approval of the ENRE and any other relevant administrative authority; |
- | To approve the consolidated text of the By-laws with the proposed amendments. |
31 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Note | 31 | Termination of agreement on real estate asset |
With regard to the real estate asset to be constructed, acquired by the Company in November 2015, the subsequent termination of the agreement due to RDSA’s default in August 2018 and the respective legal actions brought by the Company against the seller and the insurance company, and with respect to the settlement agreement dated September 30, 2019 that the Company entered into with Aseguradores de Cauciones S.A., the following events stand out as of the date of issuance of these condensed interim financial statements, in addition to those mentioned in our annual Financial Statements:
- | With regard to the USD 1 million receivable resulting from the agreement with Aseguradora de Cauciones S.A., the Company has received payment of the first installment for USD 100,000, which fell due on April 21, 2020. Furthermore, in the second quarter of 2020, the Company entered into an agreement on the extension of maturity dates, pursuant to which the following payments were renegotiated: a) the second installment for USD 50,000, whose maturity date was July 20, 2020 -which was received by the Company-; b) the third installment for USD 70,000 maturing on October 19, 2020; and c) the remaining balance of the second and third installments for USD 180,000 determined according to the original maturity of payments, plus the related interest, which will fall due on November 15, 2020. The rest of the quarterly payment schedule remains unchanged. |
- | With regard to RDSA reorganization proceedings, the Company has filed ancillary proceedings for review of the amount declared inadmissible, which, at the date of issuance of these condensed interim financial statements, are still at the stage for producing evidence. Due to the suspension of the procedural time limits duly resolved by the CSJN as a consequence of the pandemic declared by the WHO on March 11, 2020 and the mandatory and preventive isolation ordered by DNU 297/2020, and extended by supplementary executive orders, a new time frame for the future stages of the process must be set by the commercial court hearing the case. |
Note | 32 | Events after the reporting period |
On August 4, 2020, the House of Representatives gave half approval to a bill to increase the General Budget of the National Administration for the year 2020 by nearly ARS 1.9 billion in order to afford the payment of social, production and labor plans aimed at alleviating the economic crisis as a consequence of the effects of the COVID-19.
With regard to the electricity sector, it includes the recognition of credits equivalent to three times the average monthly bill of the last year of the transactions in the Wholesale Electricity Market (MEM) of Distribution Agents that provide their service in a Province or Grantors of Concessions that have adhered to the electricity rates maintenance set forth in Law 27,541, under the terms and conditions provided for by the Enforcement Authority.
The recognized credits will be applied only to distribution companies that as of October 31, 2020 do not have debts in the MEM or have adhered to a refinancing plan with CAMMESA, which must not exceed 60 monthly installments with a 12-month grace period, an interest rate on the balance equivalent to 50% of that in effect in the MEM; and comply with the terms and conditions provided for by the Enforcement Authority to guarantee compliance by Distribution companies with future monthly payment obligations.
The Senate’s approval of the bill, along with the regulation thereof, is still pending, in order to assess the scope and impact on the Company.
RICARDO TORRES |
Chairman |
32 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Free translation from the original in Spanish for publication in Argentina
REPORT ON CONDENSED INTERIM FINANCIAL STATEMENTS’ REVIEW
To the Shareholders, President and Directors
Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (Edenor S.A.)
Legal address: Avenida del Libertador 6363
Autonomous City of Buenos Aires
Tax Code No. 30-65511620-2
Introduction
We have reviewed the condensed interim financial statements of Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (Edenor S.A.) (hereinafter “Edenor S.A.” or “the Company”) including the condensed interim statement of financial position as of June 30, 2020, the related condensed interim statement of comprehensive income for the three and six months period ended June 30, 2020, the related condensed interim statements of changes in equity and cash flows for the six months period then ended and the complementary selected notes.
The balances and other information related to fiscal year 2019 and its interim periods, are an integral part of the financial statements mentioned above; therefore, they must be considered in connection with these financial statements.
Board of Directors’ responsibility
The Board of Directors of the Company is responsible for the preparation and presentation of these financial statements, under International Financial Reporting Standards (IFRS) adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), as the applicable accounting framework and incorporated by the National Securities Commission (CNV) to its standards, as they were approved by the International Accounting Standards Board (IASB), and, therefore, it is responsible for the preparation and presentation of the condensed interim financial statements mentioned in the first paragraph in accordance with IAS 34 “Interim financial information”.
33 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Auditors’ responsibility
Our review was limited to the application of the procedures established in International Standard on Review Engagements 2410 “Review of interim financial information performed by the independent auditor of the entity”, which was adopted as review standard in Argentina through Technical Pronouncement No. 33 of the FACPCE as was approved by International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists in making inquiries of Company staff responsible for the preparation of the information included in the condensed interim financial statements and the application of analytical procedures and other review procedures. This review is substantially less in scope than an audit in accordance of International Standards on Auditing, consequently, this review does not allow us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, we do not express any opinion on the financial position, comprehensive income and cash flows of the Company.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed interim financial statements mentioned in the first paragraph of this report are not prepared, in all material respects, in accordance with IAS 34.
Emphasis of matter paragraph
Without qualifying our opinion, we draw the attention to the situation explained in Note 1 in relation to the economic and financial situation of Edenor S.A. The Company’s current economic and financial situation raises substantial doubt about its ability to continue as a going concern.
34 |
CONDENSED INTERIM |
FINANCIAL STATEMENTS |
Reports on compliance with regulations in force
In accordance with current regulations, we report that, in connection with Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (Edenor S.A.):
a) except for its lack of transcription to the book “Inventories and Balances”, the condensed interim financial statements of Edenor S.A. comply, in what is within our competence, with the provisions of the General Companies Law and in the relevant resolutions of the National Securities Commission;
b) the condensed interim financial statements of Edenor S.A. arise from accounting records kept in their formal aspects in accordance with legal regulations, except for their lack of transcription to the Inventory and Balance Book, and the Daily Book (transcription to the Inventories and Balance CD ROM Book);
c) we have read the summary of activity, and additional information to the notes of condensed interim financial statements required by article 12°, Chapter III, Title IV of the regulations of the National Securities Commission on which, as regards those matters that are within our competence, we have no observations to make;
d) at June 30, 2020 the liabilities of Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (Edenor S.A.) accrued in favor of the Argentine Integrated Social Security System, according to the Company’s accounting records, amounted to ARS$ 253,802,547, none of which was claimable at that date.
Autonomous City of Buenos Aires, August 10th, 2020
PRICE WATERHOUSE & CO. S.R.L.
(Socio) |
C.P.C.E.C.A.B.A T°1 – F°17 |
Dr. R. Sergio Cravero Contador Público (UCA) C.P.C.E.C.A.B.A. T° 265 F° 92 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Empresa Distribuidora y Comercializadora Norte S.A. | ||
By: | /s/ Leandro Montero | |
Leandro Montero | ||
Chief Financial Officer |
Date: August 18, 2020