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Section 1: 20-F (FORM 20-F)

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 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 20-F
 
 
 
☐ 
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
 
☒ 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
OR
 
☐ 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________________ to __________________.
 
OR
 
☐ 
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of event requiring this shell company report __________________.
 
Commission file number 001-38376
 
 
Central Puerto S.A.
(Exact name of Registrant as specified in its charter)
Port Central S.A.
(Translation of Registrant’s name into English)
 
 
REPUBLIC OF ARGENTINA
(Jurisdiction of incorporation or organization)
 
Avenida Thomas Edison 2701
C1104BAB Buenos Aires
Republic of Argentina
(Address of principal executive offices)
 
Fernando Roberto Bonnet
Avenida Thomas Edison 2701
C1104BAB Buenos Aires
Republic of Argentina.
Facsimile: +54 (11) 4317-5900
 Email: inversores@centralpuerto.com
 
 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 
 
 Securities registered or to be registered pursuant to Section 12(b) of the Act.
 
 
Title of each class
Name of each exchange on which registered
American Depositary Shares, each representing 10 common shares of Central Puerto S.A.*
New York Stock Exchange*
 
Not for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the New York Stock Exchange.
 
Securities registered or to be registered pursuant to Section 12(g) of the Act.
 
None
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
 
None
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
 
Title of each class
Outstanding at December 31, 2018
Common shares, nominal value Ps.1.00 per share
1,514,022,256
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes  ☒            No   ☐
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes  ☐            No   ☒
 
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.
 
 
 
  
Yes  ☒           No  ☐
 
Indicate by check mark whether the registrant has submitted electronically 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).
 
Yes  ☒           No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  ☐             Accelerated filer   ☐             Non-accelerated filer  ☒            Emerging growth company  ☒
 
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐
 
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ☐             International Financial Reporting Standards as issued             Other  ☐
by the International Accounting Standards Board ☒
 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
 
Item 17  ☐            Item 18  ☐
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  ☐             No  ☒
 
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
 
Yes  ☐             No  ☐
 
 
 
 
TABLE OF CONTENTS
 
 
 
 PAGE
Item 1.
Identity of Directors, Senior Management and Advisors
1
Item 2.
Offer Statistics and Expected Timetable
1
Item 3.
Key Information
1
Item 3.A.
Selected Financial Data
1
Item 3.B
Capitalization and indebtedness
4
Item 3.C
Reasons for the offer and use of proceeds
4
Item 3.D
Risk Factors
5
Item 4.
Information of the Company
33
Item 4.A
History and development of the Company
38
Item 4.B
Business overview
42
Item 4.C
Organizational structure
124
Item 4.D
Property, plants and equipment
124
Item 5.
Operating and Financial Review and Prospects
125
Item 5.A
Operating Results
125
Item 5.B
Liquidity and Capital Resources
149
Item 5.C
Research and Development, patents and licenses, etc.
156
Item 5.D
Trend Information
156
Item 5.E
Off-balance sheet arrangements
159
Item 5.F
Contractual Obligations
159
Item 5.G
Safe Harbor
160
Item 6.
Directors, Senior Management and Employees
160
Item 7.
Shareholders and Related Party Transactions
172
Item 7.A.
Major Shareholders
172
Item 7.B
Related Party Transactions
173
Item 7.C
Interests of experts and counsel
175
Item 8.
Financial Information
175
Item 8.A.
Consolidated Statements and Other Financial Information.
175
Item 8.B
Significant Changes
176
Item 9.
The Offer and Listing
178
Item 9.A.
Offer and listing details
178
Item 9.B.
Plan of Distribution
178
Item 9.C.
Markets
178
Item 9.D.
Selling Shareholders
178
Item 9.E.
Dilution
178
Item 9.F.
Expenses of the issue
178
Item 10.
Additional Information
178
Item 10.A.
Share capital
178
Item 10.B.
Memorandum and articles of association
178
 
 
 
 
 
 
 
 
Item 10.C
Material contracts
183
Item 10.D
Exchange Controls
183
Item 10.E
Taxation
185
Item 10.F
Dividends and paying agents
192
Item 10.G
Statement by experts
192
Item 10.H
Documents on display
192
Item 10.I.
Subsidiary Information
193
Item 11.
Quantitative and Qualitative Disclosures about Market Risk
193
Item 12.
Description of Securities Other Than Equity Securities
196
Item 12.A
Debt Securities
196
Item 12.B
Warrants and Rights
196
Item 12.C
Other Securities
196
Item 12.D
American Depositary Shares
196
Item 13.
Defaults, Dividend Arrearages and Delinquencies
197
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
197
Item 15.
Controls and Procedures
198
Item 16.A
Audit committee financial expert
198
Item 16.B
Code of Ethics
198
Item 16.C
Principal Accountant Fees and Services
199
Item 16.D
Exemptions from the Listing Standards for Audit Committees
199
Item 16.E
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
199
Item 16.F
Change in Registrant’s Certifying Accountant
199
Item 16.G
Corporate Governance
199
Item 16.H.
Mine Safety Disclosure
203
Item  17.
Financial Statements
203
Item  18.
Financial Statements
203
Item 19.
Exhibits
203
 
 
 
 
 
CERTAIN DEFINITIONS
 
In this annual report, except where otherwise indicated or where the context otherwise requires:
 
● 
Argentine Corporate Law” refers to Law No. 19,550, as amended;
 
● 
“BYMA” refers to Bolsas y Mercados Argentinos S.A.;
 
● 
CAMMESA refers to Compañ’a Administradora del Mercado Mayorista Eléctrico Sociedad Anónima. See “Item 4.B, Business Overview The Argentine Electric Power SectorGeneral Overview of Legal FrameworkCAMMESA;
 
● 
“CTM” refers to Centrales Térmicas Mendoza S.A.;
 
● 
“CVO” refers to the thermal plant Central Vuelta de Obligado;
 
● 
“CVO Agreement” refers to the Agreement for Project Management and Operation, Increase of Thermal Generation Availability and Adaptation of Remuneration for Generation 2008-2011” executed on November 25, 2010 among the Secretariat of Energy and Central Puerto along with other electric power generators;
 
● 
“CVOSA” refers to Central Vuelta de Obligado S.A.;
 
● 
“Ecogas” refers collectively to Distribuidora de Gas Cuyana (“DGCU”) and Distribuidora de Gas del Centro (“DGCE”);
 
● 
Energía Base refers to the regulatory framework established under Resolution SE No. 95/13, as amended, and, from February 2017 to February 2019, regulated by Resolution SEE No. 19/17, and since March 2019, regulated by Resolution No. 1/19 of the Secretary of Renewable Resources and Electric Market of the National Ministry of Economy. See Item 4.B, Business OverviewThe Argentine Electric Power Sector;
 
● 
Energía Plus refers to the regulatory framework established under Resolution SE No. 1281/06, as amended. See Item 4.B, Business OverviewThe Argentine Electric Power SectorStructure of the IndustryEnerga Plus;
 
● 
FONINVEMEM” or “FONI” refers to the Fondo para Inversiones Necesarias que Permitan Incrementar la Oferta de Energía Eléctrica en el Mercado Eléctrico Mayorista (the Fund for Investments Required to Increase the Electric Power Supply). See Item 4.B, Business OverviewThe Argentine Electric Power SectorStructure of the IndustryThe FONINVEMEM and Similar Programs;
 
● 
“FONINVEMEM Plants” refers to the plants José de San Martín, Manuel Belgrano and Vuelta de Obligado;
 
● 
HPDA refers Hidroeléctrica Piedra del Águila S.A., the corporation that previously owned the Piedra del Aguila plant;
 
● 
“IEASA” refers to Integracion Energética Argentina S.A.;
 
● 
“IGCE” refers to Inversora de Gas del Centro S.A.;
 
● 
“IGCU” refers to Inversora de Gas Cuyana S.A.;
 
● 
La Plata Plant Sale refers to the sale of the La Plata plant to YPF EE, effective as of January 5, 2018. For further information on the La Plata Plant Sale, see “Item 4.A. History and development of the Company—La Plata Plant Sale;
 
● 
La Plata Plant Sale Effective Date is January 5, 2018. For more information on the La Plata Plant Sale Effective Date, see “Item 4.A. History and development of the Company—La Plata Plant Sale;
 
● 
LPC refers to La Plata Cogeneración S.A., the corporation that owned the La Plata plant prior to us;
 
● 
LVFVD refers to liquidaciones de venta con fecha de vencimientos a definir, or receivables from CAMMESA without a fixed due date. See Item 4.B, Business OverviewFONINVEMEM and Similar Programs;
 
● 
“MATER” refers to Term Market for Renewable Energy (“MATER”) Resolution No. 281-E/17;
 
● 
MULC refers to the foreign exchange market;
 
 
 
 
 
● 
“Resolution SRRyME No. 1/19” refers to the resolution No. 1/19 issued by the Secretary of Renewable Resources and Electric Markey of the National Ministry of Economy by which the Secretary modified the remuneration scheme (for capacity and energy) applicable to Authorized Generators (electricity generators which do not have contracts in the term market in any of its modalities) acting in the WEM;
 
● 
sales under contracts refers collectively to (i) term market sales of energy under contracts with private and public sector counterparties, (ii) sales of energy sold under the Energía Plus and (iii) sales of energy under the RenovAr Program;
 
● 
the spot market refers to energy sold by generators to the WEM and remunerated by CAMMESA pursuant to the framework in place prior to the Energía Base. See Item 4.B, Business OverviewThe Argentine Electric Power SectorStructure of the IndustryElectricity Dispatch and Spot Market Pricing prior to Resolution SE No. 95/13;
 
● 
PPA refers to capacity and energy supply agreements with customers;
 
● 
YPF refers to YPF S.A., Argentinas state-owned oil and gas company;
 
● 
YPF EE refers to YPF Energía Eléctrica S.A., a subsidiary of YPF; and
 
● 
WEM refers to the Argentine Mercado Eléctrico Mayorista, the wholesale electric power market. See Item 4.B, Business OverviewThe Argentine Electric Power SectorGeneral Overview of Legal FrameworkCAMMESA.
 
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
 
Financial Statements
 
We maintain our financial books and records and publish our consolidated financial statements (as defined below) in Argentine pesos, which is our functional currency. This annual report contains our audited consolidated financial statements as of December 31, 2018 and 2017 and for each of the years ended December 31, 2018, 2017 and 2016 (our audited consolidated financial statements”), which were approved by our board of directors (our “Board of Directors”) on April 24, 2019.
 
We prepare our audited consolidated financial statements in Argentine pesos and in conformity with the IFRS as issued by the IASB.
 
In accordance with IAS 29, the restatement of the financial statements is necessary when the functional currency of an entity is the currency of a hyperinflationary economy. To define a hyperinflationary state, IAS 29 provides a series of non-exclusive guidelines that consist of (i) analyzing the behavior of the population, prices, interest rates and wages before the evolution of price indexes and the loss of the currency’s purchasing power, and (ii) as a quantitative characteristic, verifying if the three-year cumulative inflation rate approaches or exceeds 100%. Even if in recent years there was an important increase in the general level of prices, the three-year cumulative inflation was below 100%. However, due to macroeconomic factors, the triennial inflation was above that figure in 2018. Moreover, the goals of the Argentine government and other available projections show that this trend will not be reverted in the short term. So as to evaluate the mentioned quantitative condition and to restate the financial statements, the Argentine Securities Commission established that the series of indexes to be used in the IAS 29 application is the one established by the Argentine Federation of Professional Councils in Economic Sciences. According to said index, inflation was 47.64%, 24.79% and 34.59% in the years ended December 31, 2018, 2017 and 2016, respectively. See “Risks Relating to Argentina—As of July 1, 2018, the Argentine Peso qualifies as a currency of a hyperinflationary economy and we are required to restate our historical financial statements to apply inflationary adjustments, which could adversely affect our results of operations and financial condition and those of our Argentine subsidiaries” and “—If the current levels of inflation do not decrease, the Argentine economy could be adversely affected.”
 
Therefore, our audited consolidated financial statements included herein, including the figures for the previous periods (this fact not affecting the decisions taken on the financial information for such periods), and, unless otherwise stated, the financial information included elsewhere in this annual report, were restated to consider the changes in the general purchasing power of the functional currency of the Company (Argentine peso) pursuant to IAS 29 and General Resolution no. 777/2018 of the Argentine Securities Commission. Consequently, the financial statements are stated in the current measurement unit as of December 31, 2018. The information included in our audited consolidated financial statements is not comparable to the financial statements previously published by us. For more information, see “Item 5.A. Operating Results—Factors Affecting our Results of OperationsInflation” and Note 2.1.2 to our audited consolidated financial statements.
 
Because we qualify as an emerging growth company (an EGC) as defined in Section 2(a)(19) of the U.S. Securities Act of 1933, as amended (the Securities Act), we have elected to provide in this annual report more limited disclosures than an issuer that would not qualify as an EGC would be required to provide. We remind investors that we are required to file financial statements and other periodic reports with the CNV because we are a public company in Argentina. Investors can access our historical financial statements published in Spanish on the CNVs website at www.cnv.gob.ar. The information found on the CNVs website is not a part of this annual report. Investors are cautioned not to place undue reliance on our financial statements not included in this annual report.
 
 
 
 
Currency and Rounding
 
All references herein to pesos, Argentine pesos or Ps. are to Argentine pesos, the legal currency of Argentina. All references to U.S. dollars, dollars or US$ are to U.S. dollars. All references to SEK$ are to Swedish krona. A billion is a thousand million.
 
Solely for the convenience of the reader, we have translated certain amounts included in this annual report from pesos into U.S. dollars, unless otherwise indicated, using the seller rate for U.S. dollars quoted by the Banco de la Nación Argentina for wire transfers (divisas) as of December 28, 2018, of Ps.37.70 per US$1.00. The Federal Reserve Bank of New York does not report a noon buying rate for pesos. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of the reader and should not be construed to represent that the peso amounts have been, or could have been or could be, converted into U.S. dollars at such rates or at any other rate. See “Item 3.A. Selected Financial Data—Exchange Rates.”
 
Certain figures included in this annual report and in the audited consolidated financial statements contained herein have been rounded for ease of presentation. Percentage figures included in this annual report have in some cases been calculated on the basis of such figures prior to rounding. For this reason, certain percentage amounts in this annual report may vary from those obtained by performing the same calculations using the figures in this annual report and in the consolidated financial statements contained herein. Certain other amounts that appear in this annual report may not sum due to rounding.
 
Market Share and Other Information
 
The information set forth in this annual report with respect to the market environment, market developments, growth rates and trends in the markets in which we operate is based on information published by the Argentine federal and local governments through the Instituto Nacional de Estad’siticas y Censos (the National Statistics and Census Institute, or INDEC), the Ministry of Interior, the Ministry of Energy, the Central Bank, CAMMESA, the Dirección General de Estadística y Censos de la Ciudad de Buenos Aires (General Directorate of Statistics and Census of the City of Buenos Aires) and the Dirección Provincial de Estadística y Censos de la Provincia de San Luis (Provincial Directorate of Statistics and Census of the Province of San Luis), as well as on independent third-party data, statistical information and reports produced by unaffiliated entities, as well as on our own internal estimates. In addition, this annual report contains information from Vaisala, Inc. (Vaisala - 3 Tier), a company that develops, manufactures and markets products and services for environmental and industrial measurement.
 
This annual report also contains estimates that we have made based on third-party market data. Market studies are frequently based on information and assumptions that may not be exact or appropriate.
 
Although we have no reason to believe any of this information or these sources are inaccurate in any material respect, we have not verified the figures, market data or other information on which third parties have based their studies, nor have we confirmed that such third parties have verified the external sources on which such estimates are based. Therefore, we do not guarantee, nor do we assume responsibility for, the accuracy of the information from third-party studies presented in this annual report.
 
This annual report also contains estimates of market data and information derived therefrom which cannot be gathered from publications by market research institutions or any other independent sources. Such information is based on our internal estimates. In many cases there is no publicly available information on such market data, for example from industry associations, public authorities or other organizations and institutions. We believe that these internal estimates of market data and information derived therefrom are helpful in order to give investors a better understanding of the industry in which we operate as well as our position within this industry. Although we believe that our internal market observations are reliable, our estimates are not reviewed or verified by any external sources. These may deviate from estimates made by our competitors or future statistics provided by market research institutes or other independent sources. We cannot assure you that our estimates or the assumptions are accurate or correctly reflect the state and development of, or our position in, the industry.
 
FORWARD-LOOKING STATEMENTS
 
This annual report contains estimates and forward-looking statements, principally in “Item 3.D. Risk Factors,” “Item 4.B. Business Overview” and “Item 5. Operating and Financial Review and Prospects.
 
Our estimates and forward-looking statements are mainly based on our current beliefs, expectations and estimates of future courses of action, events and trends that affect or may affect our business and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us.
 
Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things:
 
● 
changes in general economic, financial, business, political, legal, social or other conditions in Argentina;
 
 
 
 
● 
changes in conditions elsewhere in Latin America or in either developed or emerging markets;
 
● 
changes in capital markets in general that may affect policies or attitudes toward lending to or investing in Argentina or Argentine companies, including volatility in domestic and international financial markets;
 
● 
increased inflation;
 
● 
fluctuations in exchange rates, including a significant devaluation of the Argentine peso;
 
● 
changes in the law, norms and regulations applicable to the Argentine electric power and energy sector, including changes to the current regulatory frameworks, changes to programs established to incentivize investments in new generation capacity and reductions in government subsidies to consumers;
 
● 
our ability to develop our expansion projects and to win awards for new potential projects;
 
● 
increases in financing costs or the inability to obtain additional debt or equity financing on attractive terms, which may limit our ability to fund new activities;
 
● 
government intervention, including measures that result in changes to the Argentine labor market, exchange market or tax system;
 
● 
adverse legal or regulatory disputes or proceedings;
 
● 
changes in the price of energy, power and other related services;
 
● 
changes in the prices and supply of natural gas or liquid fuels;
 
● 
changes in the amount of rainfall and accumulated water;
 
● 
changes in environmental regulations, including exposure to risks associated with our business activities;
 
● 
risks inherent to the demand for and sale of energy;
 
● 
the operational risks related to the generation, as well as the transmission and distribution, of electric power;
 
● 
ability to implement our business strategy, including the ability to complete our construction and expansion plans in a timely manner and according to our budget;
 
● 
competition in the energy sector, including as a result of the construction of new generation capacity;
 
● 
exposure to credit risk due to credit arrangements with CAMMESA;
 
● 
our ability to retain key members of our senior management and key technical employees;
 
● 
our relationship with our employees; and
 
● 
other factors discussed under “Item 3.D.—Risk Factors in this annual report.
 
The words believe, may, will, aim, estimate, continue, anticipate, intend, expect, forecast and similar words are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements speak only as of the date they were made, and we do not undertake any obligation to update publicly or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors, except as required by applicable law. In light of the risks and uncertainties described above, the forward-looking events and circumstances discussed in this annual report might not occur and do not constitute guarantees of future performance. Because of these uncertainties, you should not make any investment decisions based on these estimates and forward-looking statements.
 
 
 
 
PART I
 
Item 1. 
Identity of Directors, Senior Management and Advisors
 
Not applicable.
 
Item 2. 
Offer Statistics and Expected Timetable
 
Not applicable.
 
Item 3. 
Key Information
 
Item 3.A. 
Selected Financial Data
 
The following tables present selected consolidated financial data for us as of the dates and for the periods indicated. You should read this information in conjunction with our audited consolidated financial statements and related notes beginning on page F-1, and the information under “Item 5.A Operating Results” included elsewhere in this annual report.
 
The selected consolidated financial data as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016 has been derived from our audited consolidated financial statements included in this annual report. Prior period amounts have been restated to reflect the La Plata plant operations as discontinued operations in all periods presented. Please see Note 21 to our audited consolidated financial statements for further information on how we have accounted for the La Plata Plant Sale in our audited consolidated financial statements. Our historical results are not necessarily indicative of our future results. Our audited consolidated financial statements have been audited by Pistrelli, Henry Martin y Asociados S.R.L. (a member firm of Ernst & Young Global), an independent registered public accounting firm, whose audit report is included elsewhere in this annual report.
 
In accordance with IAS 29, the restatement of the financial statements is necessary when the functional currency of an entity is the currency of a hyperinflationary economy. To define a hyperinflationary state, IAS 29 provides a series of non-exclusive guidelines that consist of (i) analyzing the behavior of the population, prices, interest rates and wages before the evolution of price indexes and the loss of the currency’s purchasing power, and (ii) as a quantitative characteristic, verifying if the three-year cumulative inflation rate approaches or exceeds 100%. Even if in the recent years there was an important increase in the general level of prices, the three-year cumulative inflation was below 100%. However, due to macroeconomic factors, the triennial inflation was above that figure in 2018. Moreover, the goals of the Argentine government and other available projections show that this trend will not be reverted in the short term. So as to evaluate the mentioned quantitative condition and to restate the financial statements, the Argentine Securities Commission established that the series of indexes to be used in the IAS 29 application is the one established by the Argentine Federation of Professional Councils in Economic Sciences. According to said index, inflation was 47.64%, 24.79% and 34.59% in the years ended December 31, 2018, 2017 and 2016, respectively. See “Risks Relating to Argentina—As of July 1, 2018, the Argentine Peso qualifies as a currency of a hyperinflationary economy and we are required to restate our historical financial statements to apply inflationary adjustments, which could adversely affect our results of operations and financial condition and those of our Argentine subsidiaries” and “—If the current levels of inflation do not decrease, the Argentine economy could be adversely affected.”
 
Therefore, our audited consolidated financial statements included herein, including the figures for the previous periods (this fact not affecting the decisions taken on the financial information for such periods), and, unless otherwise stated, the financial information included elsewhere in this annual report, were restated to consider the changes in the general purchasing power of the functional currency of the Company (Argentine peso) pursuant to IAS 29 and General Resolution no. 777/2018 of the Argentine Securities Commission. Consequently, the financial statements are stated in the current measurement unit as of December 31, 2018. The information included in our audited consolidated financial statements, is not comparable to the financial statements previously published by us. For more information, see “Item 5.A. Operating Results—Factors Affecting our Results of OperationsInflation” and Note 2.1.2 to our audited consolidated financial statements.
 
The selected financial data as of and for the year ended December 31, 2015 has not been presented as this cannot be provided on a restated basis without unreasonable effort or expense.
 
We maintain our financial books and records and publish our audited consolidated financial statements in Argentine pesos, which is our functional currency. We prepare our audited consolidated financial statements in Argentine pesos and in conformity with IFRS as issued by the IASB.
 
Solely for convenience of the reader, Peso amounts as of and for the year ended December 31, 2018 have been translated into U.S. dollars. The rate used to translate such amounts as of December 31, 2018 was Ps. 37.70 to US$1.00, which was the reference exchange rate reported by the Banco de la Nación Argentina for wire transfers (divisas) as of December 28, 2018. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of the reader and should not be construed to represent that the Peso amounts have been, or could have been or could be, converted into, U.S. dollars at such rates or any other rate. See “Item 3.A. Selected Financial Data—Exchange Rates.”
 
 
1
 
 
Selected Consolidated Statement of Comprehensive Income Data
 
 
 
Year Ended December 31,
 
 
 
(in thousands of US$)(1)
 
 
(in thousands of Ps.)
 
 
 
2018
 
 
2018
 
 
2017
 
 
2016
 
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
Revenues 
  378,392 
  14,265,370 
  9,638,568 
  7,044,039 
Cost of sales 
  (172,061)
  (6,486,698)
  (5,199,149)
  (4,980,226)
Gross income 
  206,331 
  7,778,672 
  4,439,419 
  2,063,813 
Administrative and selling expenses 
  (36,852)
  (1,389,336)
  (1,056,257)
  (892,626)
Other operating income 
  350,739 
  13,222,842 
  930,062 
  2,324,243 
Other operating expenses 
  (3,525)
  (132,881)
  (140,138)
  (171,952)
CVO receivables update
  292,229 
  11,017,014 
  - 
  - 
Operating income 
  808,922 
  30,496,311 
  4,173,086 
  3,323,478 
Loss on net monetary position 
  (107,061)
  (4,036,196)
  (151,904)
  (1,836,626)
Finance income 
  60,483 
  2,280,193 
  1,558,816 
  873,915 
Finance expenses 
  (167,132)
  (6,300,881)
  (1,200,654)
  (1,205,447)
Share of the profit of associates 
  28,493 
  1,074,185 
  1,173,004 
  422,650 
Income before income tax from continuing operations
  623,705 
  23,513,612 
  5,552,348 
  1,577,970 
Income tax for the year 
  (175,182)
  (6,604,351)
  (1,081,177)
  (1,006,417)
Net income for the year from continuing operations
  448,523 
  16,909,261 
  4,471,171 
  571,553 
Discontinued operations
    
    
    
    
Income after tax for the year from discontinued operations
  7,326 
  276,177 
  791,274 
  806,989 
Net income for the year 
  455,849 
  17,185,438 
  5,262,445 
  1,378,542 
Other comprehensive income, net 
  (5,136)
  (193,613)
  (520,885)
  357,911 
Total comprehensive income for the year
  450,172 
  16,991,825 
  4,741,560 
  1,736,453 
Number of Outstanding Shares (basic and diluted)
  1,505,170,408 
  1,505,170,408 
  1,505,170,408 
  1,505,170,408 
Net income per share (basic and diluted) 
  0.30 
  11.64 
  3.52 
  0.92 
Net income per share from continuing operations (Ps.)
  0.30 
  11.46 
  2.99 
  0.38 
Cash dividend per share (Ps.) 
  0.02 
  0.94 
  1.25 
  1.69 
_____________
(1) 
Solely for the convenience of the reader, peso amounts as of December 31, 2018 have been translated into U.S. dollars at the exchange rate as of December 28, 2018 of Ps. 37.70 to US$1.00. See “Exchange Rates” and “Presentation of Financial and Other Information” for further information on recent fluctuations in exchange rates.
 
Selected Consolidated Statement of Financial Position
 
 
 
As of December 31,
 
 
 
(in thousands of US$)(1)
 
 
(in thousands of Ps.)
 
 
 
2018
 
 
2018
 
 
2017
 
 
2016
 
Capital stock 
  40,160 
  1,514,022 
  1,514,022 
  1,514,022 
Equity 
  873,444 
  32,928,854 
  17,031,535 
  13,676,029 
Total Assets 
  1,518,828 
  57,259,866 
  34,348,994 
  30,398,781 
_____________
(1) 
Solely for the convenience of the reader, peso amounts as of December 31, 2018 have been translated into U.S. dollars at the exchange rate as of December 28, 2018 of Ps.37.70 to US$1.00. See “—Exchange Rates” and “Presentation of Financial and Other Information” for further information on recent fluctuations in exchange rates.
 
 
2
 
 
 
 
As of December 31,
 
 
 
(in thousands of US$)(1)
 
 
(in thousands of Ps.)
 
 
 
2018
 
 
2018
 
 
2017
 
Non-current assets
 
 
 
 
 
 
 
 
 
Property, plant and equipment                                                                             
  598,605 
  22,567,418 
  17,451,669 
Intangible assets                                                                             
  59,290 
  2,235,230 
  1,988,603 
Investment in associates                                                                             
  53,006 
  1,998,336 
  1,830,138 
Trade and other receivables (2)                                                                             
  442,218 
  16,671,608 
  3,842,054 
Other non-financial assets                                                                             
  5,914 
  222,955 
  18,782 
Deferred tax asset                                                                             
  - 
  - 
  2,996 
Inventories                                                                             
  1,981 
  74,687 
  71,187 
Total non-current assets                                                                             
  1,161,014 
  43,770,234 
  25,205,429 
Current assets
    
    
    
Inventories                                                                             
  5,859 
  220,896 
  194,640 
Other non-financial assets                                                                             
  13,133 
  495,130 
  695,313 
Trade and other receivables(2)                                                                             
  280,611 
  10,579,028 
  5,733,942 
Other financial assets                                                                             
  52,112 
  1,964,630 
  1,639,941 
Cash and cash equivalents                                                                             
  6,099 
  229,948 
  130,863 
Total current assets                                                                             
  357,814 
  13,489,632 
  8,394,699 
Assets held for sale                                                                             
  - 
  - 
  748,866 
Total assets                                                                             
  1,518,828 
  57,259,866 
  34,348,994 
Equity and liabilities
    
    
    
Equity
    
    
    
Capital stock                                                                             
  40,160 
  1,514,022 
  1,514,022 
Adjustment to capital stock                                                                             
  303,505 
  11,442,144 
  11,442,144 
Legal reserve                                                                             
  10,170 
  383,393 
  162,480 
Voluntary reserve                                                                             
  116,877 
  4,406,281 
  1,019,873 
Retained earnings                                                                             
  390,327 
  14,715,337 
  2,206,313 
Accumulated other comprehensive income                                                                             
  - 
  - 
  207,999 
Non-controlling interests                                                                             
  12,405 
  467,677 
  478,704 
Total equity                                                                             
  873,444 
  32,928,854 
  17,031,535 
Non-current liabilities
    
    
    
Other non-financial liabilities                                                                             
  51,960 
  1,958,883 
  692,009 
Other loans and borrowings                                                                             
  138,038 
  5,204,030 
  2,183,278 
Borrowings from CAMMESA                                                                             
  26,639 
  1,004,304 
  1,558,485 
Compensation and employee benefits liabilities                                                                             
  3,938 
  148,470 
  166,983 
Deferred income tax liabilities                                                                             
  127,145 
  4,793,384 
  3,847,033 
Total non-current liabilities                                                                             
  347,720 
  13,109,071 
  8,447,788 
Current liabilities
    
    
    
Trade and other payables                                                                             
  45,886 
  1,729,909 
  1,501,885 
Other non-financial liabilities                                                                             
  44,056 
  1,660,944 
  973,971 
Other loans and borrowings                                                                             
  48,088 
  1,812,910 
  2,588,283 
Borrowings from CAMMESA                                                                             
  17,843 
  672,668 
  746,503 
Compensation and employee benefits liabilities                                                                             
  10,376 
  391,168 
  477,136 
Income tax payable                                                                             
  117,158 
  4,416,843 
  1,619,402 
Provisions                                                                             
  14,257 
  537,499 
  610,476 
Total current liabilities                                                                             
  297,664 
  11,221,941 
  8,517,656 
Liabilities directly associated with the assets held for sale
  - 
  - 
  352,015 
 
  297,664 
  11,221,941 
  8,869,671 
Total liabilities                                                                             
  645,385 
  24,331,012 
  17,317,459 
Total equity and liabilities                                                                             
  1,518,828 
  57,259,866 
  34,348,994 
_____________
(1) 
Solely for the convenience of the reader, peso amounts as of December 31, 2018 have been translated into U.S. dollars at the exchange rate as of December 28, 2018 of Ps.37.70 to US$1.00. See “—Exchange Rates” and “Presentation of Financial and Other Information” for further information on recent fluctuations in exchange rates.
(2) 
Trade and other receivables include receivables from CAMMESA. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources,” and “—Receivables from CAMMESA.”
 
Exchange Rates
 
From April 1, 1991 until the end of 2001, Law No. 23,928 (the Convertibility Law) established a regime under which the Central Bank was obliged to sell U.S. dollars at a fixed rate of one peso per U.S. dollar. On January 6, 2002, the Argentine Congress enacted the Public Emergency Law, formally ending the regime of the Convertibility Law, abandoning over ten years of U.S. dollar-peso parity and eliminating the requirement that the Central Banks reserves in gold, foreign currency and foreign currency denominated debt be at all times equivalent to 100% of the monetary base.
 
The Public Emergency Law, which was in effect until December 31, 2017, granted the Argentine government the power to set the exchange rate between the peso and foreign currencies and to issue regulations related to the MULC. Following a brief period during which the Argentine government established a temporary dual exchange rate system, pursuant to the Public Emergency Law, the peso has been allowed to float freely against other currencies since February 2002. However, the Argentine Central Bank has had the power to intervene in the exchange rate market by buying and selling foreign currency for its own account, a practice in which it engaged on a regular basis. In recent years and particularly since 2011, the Argentine government has increased controls on exchange rates and the transfer of funds into and out of Argentina.
 
With the tightening of exchange controls beginning in late 2011, in particular with the introduction of measures that allowed limited access to foreign currency by private sector companies and individuals (such as requiring an authorization of tax authorities to access the foreign currency 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, increased significantly over the official exchange rate. Most of the foreign exchange restrictions were gradually lifted in since December 2015, and finally on May 19, 2017, the Central Bank issued Communication A 6244, which substantially modified the applicable foreign exchange regulations and eliminated the set of restrictions for accessing the MULC. As a result of the elimination of the limit amount for the purchase of foreign currency without specific allocation or need of prior approval the substantial spread between the official exchange rate and the implicit exchange rate derived from securities transactions has substantially decreased. In addition, by virtue of the 2018 IMF Agreement (see “Item 4. Information of the CompanyRecent Political and Economic Developments in Argentina— IMF Agreement”), on September 28, 2018. As of October 1, 2018, the BCRA introduced an exchange rate band. The peso’s exchange rate with the U.S. Dollar was allowed to fluctuate between Ps.34.00 and Ps.44.00 per US$1.00 (range that was adjusted daily at an annual rate of 3% until December 2018, and for the first quarter of 2019, is adjusted daily at an annual rate of 2%) without the BCRA’s intervention. On April 29, 2019, the Monetary Policy Counsel (Comité de Política Monetaria) of the Central Bank (the “COPOM”) decided to introduce changes to the monetary policy, with an aim to reducing volatility in the foreign exchange market. According to the new scheme: (i) if the exchange rate is between Ps. 39.755 and Ps. 51.488, the Central Bank may intervene, subject to market conditions, in the foreign exchange market and sell U.S. dollars in the market, and (ii) if the exchange rate is above Ps. 51.488, the Central Bank will sell foreign currency for up to 250 million U.S. dollars daily. Also, the Central Bank could decide to perform additional interventions. The Argentine pesos resulting from such sales will be discounted from the monetary base. The COPOM also confirmed that the Central Bank will not intervene until June 2019 in the foreign exchange market if the exchange rate decreases below Ps. 39.755.
 
 
3
 
 
After several years of moderate variations in the nominal exchange rate, in 2012 the peso depreciated approximately 14% with respect to the U.S. dollar. This was followed in 2013 and 2014 by a depreciation of the peso with respect to the U.S. dollar that exceeded 30%, including a loss of approximately 23% in January 2014. In 2015, the peso depreciated approximately 52% with respect to the U.S. dollar, including, approximately, a 10% devaluation from January 1, 2015 to September 30, 2015 and a 38% devaluation during the last quarter of the year, mainly concentrated after December 16, 2015 when certain exchange controls were lifted. In 2016, 2017 and 2018, the peso depreciated approximately 21.86%, 17.36% and 102.16%, respectively, in each case, with respect to the U.S. dollar. The peso depreciated approximately 19.10% from December 28, 2018 through April 25, 2019.
 
The following table sets forth the annual high, low, average and period-end exchange rates for the periods indicated, expressed in pesos per U.S. dollar and not adjusted for inflation. There can be no assurance that the peso will not depreciate or appreciate again in the future. The Federal Reserve Bank of New York does not report a buying rate for pesos.
 
 
 
Exchange Rates
 
 
 
High(1)
 
 
Low(1)
 
 
Average(1)(2)
 
 
Period-end(1)
 
2014                                                          
  8.5570 
  6.5210 
  8.1196 
  8.5510 
2015                                                          
  13.4000 
  8.5550 
  9.2653 
  13.0400 
2016                                                          
  16.0300 
  13.2000 
  14.8403 
  15.8900 
2017                                                          
  19.2000 
  15.1900 
  16.5704 
  18.6490 
2018                                                          
  41.2500 
  18.4100 
  28.1762 
  37.7000 
October                                                       
  40.5000 
  35.9500 
  37.2065 
  35.9500 
November                                                       
  39.0500 
  35.4000 
  36.4555 
  37.7200 
December                                                       
  38.6000 
  36.5000 
  37.8350 
  37.7000 
2019
    
    
    
    
January                                                       
  37.7100 
  36.9000 
  37.3836 
  37.3500 
February                                                       
  39.6700 
  37.1700 
  38.4045 
  39.1500 
March                                                       
  42.5000 
  39.8100 
  41.1120 
  43.3500 
April (3)                                                       
  44.9000 
  41.6200 
  42.9719 
  44.9000 
_____________
(1) 
Pesos to U.S. dollars exchange rate as quoted by the Banco de la Nación Argentina for wire transfers (divisas).
(2) 
Average of the exchange rates based on working days averages for each month.
(3) 
Through April 25, 2019.

 
Item 3.B 
Capitalization and indebtedness
 
Not applicable.
 
Item 3.C 
Reasons for the offer and use of proceeds
 
Not applicable.
 
Item 3.D 
Risk Factors
 
You should carefully consider the risks described below, as well as the other information in this annual report. Our business, results of operations, financial condition or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common shares and ADSs could decline. The risks described below are those known to us and that we currently believe may materially affect us.
 
 
4
 
 
Risks Relating to Argentina
 
Substantially all of our revenues are generated in Argentina and thus are highly dependent on economic and political conditions in Argentina
 
Central Puerto is an Argentine corporation (sociedad anónima). All of our assets and operations are located in Argentina. Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic, regulatory, social and political conditions prevailing in Argentina, including the level of growth, inflation rates, foreign exchange rates, interest rates and international developments and conditions that may affect Argentina. Between 2007 and 2015, the Fernández de Kirchner administrations increased direct intervention in the Argentine economy, including the implementation of expropriation measures, price controls, exchange controls and changes in laws and regulations affecting foreign trade and investment. These measures had a material adverse effect on private sector entities, including us. It is possible that similar measures could be adopted by the current or future Argentine government or that economic, social and political developments in Argentina, over which we have no control, could have a material adverse effect on the Argentine economy and, in turn, adversely affect our financial condition and results of operations. See Managements Discussion and Analysis of Financial Condition and Results of OperationsFactors Affecting our Results of OperationsArgentine Economic Conditions.
 
The Argentine economy remains vulnerable and any significant decline could adversely affect our results of operations
 
The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high levels of inflation and currency devaluation. Sustainable economic growth in Argentina is dependent on a variety of factors, including the international demand for Argentine exports, the stability and competitiveness of the peso against foreign currencies, confidence among consumers and foreign and domestic investors, a stable rate of inflation, national employment levels and the circumstances of Argentinas regional trade partners.
 
Argentina’s economy contracted during 2018 and the country’s economy remains vulnerable and unstable notwithstanding efforts by the Argentine government to address inflation and foreign exchange instability, as reflected by the following economic conditions:
 
● 
inflation remains high and may continue at similar levels in the future; according to a report published by INDEC, cumulative consumer price inflation from December 2017 to December, 2018 was 47.64%, and inflation during January 2019 and February 2019, was 2.9% and 3.8%, respectively;
 
● 
according to the revised calculation of the 2004 GDP published by the INDEC in March 2017, which forms the basis for the real GDP calculation for every year after 2004, GDP decreased by 2.3% in 2016 (as compared to 2015) and increased by 2.6% in 2015, as compared to a decline of 2.5% in 2014 and growth of 2.4% in 2013. According to data published by the INDEC on March 22, 2018 GDP for 2017 increased by 2.9%. According to preliminary data published by the INDEC on March 22, 2018, GDP for 2018 decreased 2.5%. Argentina’ s GDP performance has depended to a significant extent on high commodity prices which, despite having favorable long-term trends, are volatile in the short-term and beyond the control of the Argentine government and private sector;
 
● 
Argentinas public debt as a percentage of GDP remains high;
 
● 
the discretionary increase in public expenditures has resulted, and could continue to result, in a fiscal deficit;
 
● 
investment as a percentage of GDP remains too low to sustain the growth rate of the past decade;
 
● 
a significant number of protests or strikes could take place, as has occurred in the past, which could adversely affect various sectors of the Argentine economy;
 
● 
energy or natural gas supply may not be sufficient to supply industrial activity (thereby limiting industrial development) and consumption;
 
● 
unemployment and informal employment remain high, according to INDEC, unemployment rate during the fourth quarter of 2018 was 9.1%; and
 
● 
in the climate created by the above mentioned conditions, demand for foreign currency could grow, generating a capital flight effect as in recent years.
 
 
5
 
 
Argentina’s fiscal imbalances, its dependence on foreign revenues to cover its fiscal deficit, and material rigidities that have historically limited the ability of the economy to absorb and adapt to external factors, have added to the severity of the current crisis.
 
As in the recent past, Argentinas economy may be adversely affected if political and social pressures inhibit the implementation by the Argentine government of policies designed to control inflation, generate growth and enhance consumer and investor confidence, or if policies implemented by the Argentine government that are designed to achieve these goals are not successful. These events could materially adversely affect our financial condition and results of operations.
 
Any decline in economic growth, increased economic instability or expansion of economic policies and measures taken by the Argentine government to control inflation or address other macroeconomic developments that affect private sector entities such as us, all developments over which we have no control, could have an adverse effect on our financial condition or results of operations.
 
Certain risks are inherent in any investment in a company operating in a developing country such as Argentina
 
Argentina is developing country and investing in developing countries generally carries risks. These risks include political, social and economic instability that may affect Argentina’s economic results which can stem from many factors, including the following:
 
● 
high interest rates;
 
● 
abrupt changes in currency values;
 
● 
high levels of inflation;
 
● 
exchange controls;
 
● 
wage and price controls;
 
● 
regulations to import equipment and other necessities relevant for operations;
 
● 
changes in governmental economic, administrative or tax policies; and
 
● 
political and social tensions.
 
Any of these factors, as well as volatility in the capital markets, may adversely affect our business, results of operations, financial condition, the value of our ADSs, and our ability to meet our financial obligations.
 
Economic and political developments in Argentina, including the upcoming presidential and congressional elections, and future policies of the Argentine government, may affect the economy, as well as the operations of the energy industry, including the operations of Central Puerto
 
Since assuming office on December 10, 2015, the Macri administration has announced and implemented several significant economic and policy reforms (see “Item 4. Information of the CompanyRecent Political and Economic Developments in Argentina.”) As of the date of this annual report, the long-term impact of these measures and any future measures taken by the current administration on the Argentine economy as a whole and the energy sector in particular remains uncertain.
 
The Macri administration’s political party Cambiemos does not have a majority of seats in the Argentine Congress and, therefore, it may be difficult to adopt some of those measures unless he obtains support from the opposition, creating uncertainty as to the ability of the Macri administration to pass any measure that it expects to implement. In addition, recent judicial decisions substantially limiting the Macri administrations efforts to raise tariffs and protests throughout Argentina in respect of such efforts have added to political uncertainty. This political uncertainty in respect of economic measures could lead to volatility in the market prices of securities of Argentine companies.
 
The fiscal, monetary and currency adjustments undertaken by the Macri administration may subdue growth in the short-term. For example, immediately after the foreign exchange controls were lifted on December 16, 2015, the dismantling of the multiple exchange regime resulted in the official peso exchange rate (available only for certain types of transactions) falling in value by 40.1%, as the peso-U.S. dollar exchange rate reached Ps.13.76 to US$1.00 on December 17, 2015. See “—Significant fluctuations in the value of the peso could adversely affect the Argentine economy and, in turn, adversely affect our results of operations” On April 25, 2019, the exchange rate was Ps.44.90 to US$1.00, as quoted by the Banco de la Nación Argentina for wire transfers (divisas).
 
 
6
 
 
As of the date of this annual report, the impact that these measures and any future measures taken by the current administration will have on the Argentine economy as a whole and the electric power industry in particular cannot be predicted. The planned economic liberalization could be disruptive to the economy and fail to benefit, or harm, our business. In particular, we have no control over the implementation of the reforms to the regulatory framework that governs our operations and cannot guarantee that these reforms will be implemented or implemented in a manner that will benefit our business. The failure of these measures to achieve their intended goals could adversely affect the Argentine economy, which, in turn may have an adverse effect on our financial condition and results of operations.
 
Further, presidential and congressional elections in Argentina are scheduled to take place in October 2019, and their impact on the future economic and political environment is uncertain, but likely to be material. This uncertainty may itself have a material adverse effect on Argentina’s economy. No assurances can be made as to the policies that may be implemented by a new Argentine administration, or that political developments in Argentina will not adversely affect the Argentine economy and our business, financial condition and results of operations. In addition, we cannot assure you that future economic, regulatory, social and political developments in Argentina will not impair our business, financial condition or results of operations, or cause the market value of our shares to decline.
 
If the current levels of inflation do not decrease, the Argentine economy could be adversely affected
 
Historically, inflation has materially undermined the Argentine economy and the Argentine governments ability to create conditions that permit growth. In recent years, Argentina has experienced high inflation rates. See “—The credibility of several Argentine economic indices has been called into question, which has led to a lack of confidence in the Argentine economy and could affect your evaluation of the market value of the ADSs below.
 
During 2016, the City of Buenos Aires CPI inflation rate was 41.05%, while according to the Province of San Luis CPI, the inflation rate was 31.53%. During 2017, the INDEC’s CPI inflation rate was recorded at 24.8%. The CPI for 2018 was 47.64%, the highest rate since 1991. In the past, and particularly throughout the Fernández de Kirchner administration, the Argentine government has implemented programs to control inflation and monitor prices for essential goods and services, including attempts to freeze the price of certain supermarket products and price support arrangements agreed between the Argentine government and private sector companies in several industries and markets, that did not address the structural causes of inflation and failed to reduce inflation.
 
High inflation rates affect Argentinas foreign competitiveness, social and economic inequality, negatively impacts employment, consumption and the level of economic activity and undermine confidence in Argentinas banking system, which could further limit the availability of and access by local companies to domestic and international credit.
 
Inflation remains a challenge for Argentina given its persistent nature in recent years. The Argentine government announced its intention to reduce the primary fiscal deficit as a percentage of GDP over time and also reduce the Argentine governments reliance on Central Bank financing (see “Item 4. Information of the CompanyRecent Political and Economic Developments in Argentina”). If, despite the measures adopted by the Argentine government, these measures fail to address Argentinas structural inflationary imbalances, the current levels of inflation may continue and have an adverse effect on Argentinas economy and can also lead to an increase in Argentinas debt. Moreover, certain objectives of the Argentine government, such as the increase in tariffs to incentivize investment in the energy sector, may create inflationary pressures. Inflation in Argentina has contributed to a material increase in our costs of operation, in particular labor costs, and negatively impacted our financial condition.
 
Inflation rates could escalate in the future, and there is uncertainty regarding the effects that the measures adopted, or that may be adopted in the future, by the Argentine government to control inflation may have. See “—Government intervention may adversely affect the Argentine economy and, as a result, our business and results of operations. Increased inflation could adversely affect the Argentine economy, which in turn may have an adverse effect on our financial condition and results of operations. See Item 5.A. Operating ResultsFactors Affecting Our Results of OperationsInflation.
 
As of July 1, 2018, the Argentine Peso qualifies as a currency of a hyperinflationary economy and we are required to restate our historical financial statements to apply inflationary adjustments, which could adversely affect our results of operations and financial condition and those of our Argentine subsidiaries.
 
Pursuant to the International Accounting Standard 29, Financial Reporting in Hyperinflationary Economies (“IAS 29”), the financial statements of entities whose functional currency is that of a hyperinflationary economy must be adjusted for the effects of changes in a general price index. IAS 29 does not prescribe when hyperinflation arises and the International Accounting Standards Board (“IASB”) does not identify specific hyperinflationary jurisdictions. However, IAS 29 provides a series of non-exclusive guidelines that consist of (i) analyzing the behavior of the population, prices, interest rates and wages before the evolution of price indexes and the loss of the currency’s purchasing power, and (ii) as a quantitative characteristic, verifying if the three-year cumulative inflation rate approaches or exceeds 100%. In June 2018, the International Practices Task Force of the Centre for Quality (“IPTF”), which monitors countries experiencing high inflation, categorized Argentina as a country with projected three-year cumulative inflation rate greater than 100%. In addition, certain qualitative macroeconomic factors provided under IAS 29 were also identified. Therefore, Argentine companies using IFRS, such as us, are required to apply IAS 29 to their financial statements for periods ending on and after July 1, 2018.
 
 
7
 
 
Adjustments to reflect inflation, including tax indexation, such as those required by IAS 29, were originally prohibited pursuant to Law No. 23,928 (the “Law 23,928”). In addition, Decree No. 664/03, issued by the Argentine government, instructed regulatory authorities, such as the Argentine Securities Commission (Comisión Nacional de Valores) (“CNV”), to accept only financial statements reported in constant currency. However, on December 4, 2018, Law 27,468 (“Law 27,468”) abrogated Decree No. 664/03 and amended Law 23,928 indicating that the prohibition of inflation adjustments no longer applies to financial statements submitted for regulatory purposes. Certain regulatory authorities, such as the CNV, now require that financial statements for periods ended on and after December 31, 2018 should be adjusted for inflation pursuant to IAS 29. As a result, our audited consolidated financial statements included in this annual report, including the figures for the previous periods (this fact not affecting the decisions taken on the financial information for such periods), and, unless otherwise stated, the financial information included elsewhere in this annual report, were restated to consider the changes in the general purchasing power of the functional currency of the Company (Argentine peso) pursuant to IAS 29 and General Resolution no. 777/2018 of the Argentine Securities Commission.
 
Law 27,468 also substituted the WPI (as defined below) for the CPI as the index to benchmark tax indexation, and modified the standards for triggering the tax indexation procedure. In addition, Law 27,468 provides that during the first three years beginning on January 1, 2018, tax indexation will be required if the variation of the Consumer Price Index (“CPI”) exceeds 55% in 2018, 30% in 2019 and 15% in 2020. The tax indexation determined during any such year will be allocated as follows: 1/3 in that same year, and the remaining 2/3 in equal parts in the following two years. From January 1, 2021, the tax indexation procedure will be triggered under similar standards as those set forth by IAS 29.
 
Accordingly, we have recognized a loss regarding the effect of adjustment by inflation of Ps. 4,036 million, Ps. 152 million and Ps. 1,837 million in our financial statements for the years ended 2018, 2017 and 2016, respectively. See Note 2.1.2 to our financial statements.
 
The credibility of several Argentine economic indices has been called into question, which has led to a lack of confidence in the Argentine economy and could affect your evaluation of the market value of the ADSs
 
During the administrations of Kirchner and Fernández de Kirchner, the INDEC, the Argentine governments principal statistical agency, underwent institutional and methodological reforms that gave rise to controversy regarding the reliability of the information that it produced. Reports published by the IMF had stated that their staff used alternative measures of inflation for macroeconomic surveillance, including data produced by private sources, which have shown inflation rates considerably higher than those published by the INDEC between 2007 and 2015. The IMF also censured Argentina for failing to make sufficient progress, as required under the Articles of Agreement of the IMF, in adopting remedial measures to address the quality of official data, including inflation and GDP data.
 
On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to its CPI, GDP, foreign trade and poverty data, the Macri administration declared the national statistical system and the INDEC in a state of administrative emergency through December 31, 2016, which was not renewed. The INDEC suspended publication of certain statistical data until it completed reorganization of its technical and administrative structure to recover its ability to produce sufficient and reliable statistical information. During the first six months of this reorganization period, the INDEC published official CPI figures published by the City of Buenos Aires and the Province of San Luis for reference. On June 29, 2016, the INDEC published a report that included revised GDP data for the years 2004 through 2015. Among other adjustments, in calculating GDP for 2004, the INDEC made changes to the composition of GDP that resulted in a downward adjustment of approximately 12% for that year. In calculating real GDP for subsequent years based on the revised 2004 GDP, the INDEC used deflators that are consistent with its revised methodology to calculate inflation. By understating inflation in the past, the INDEC had overstated growth in real terms. The adjustments made by the INDEC resulted in a determination of real GDP growth for the period 2004-2014 of 44.8%, as opposed to a 63% growth in real terms for the same period resulting from the information used prior to June 29, 2016.
 
Following the publication of revised data and a new inflation index, on November 9, 2016, the IMF lifted the censorship against Argentina, stating that the country had resumed the publication of data in a manner consistent with its obligations under the Articles of Agreement of the IMF.
 
The Argentine governments reforms seek to produce official data that meets international standards. In order to be effective, however, reforms require certain implementation steps and the timely collection of data, the success of which may be outside of the Argentine governments control. If these reforms cannot be successfully implemented, such failure may adversely affect the Argentine economy, in particular by undermining consumer and investor confidence. The INDECs past or future data may be materially revised to reveal a different economic or financial situation in Argentina, which could affect investors perception of Argentina, including the market value of the ADSs. In addition, the failure or delays in implementing the expected changes may impair other measures taken by the Central Bank to tackle inflation. This, in turn, could have a negative impact on Argentinas economy and, as a result, could have an adverse effect on our ability to access international capital markets to finance our operations and growth, adversely affecting our results of operations and financial condition.
 
 
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Significant fluctuations in the value of the peso could adversely affect the Argentine economy and, in turn, adversely affect our results of operations
 
The depreciation of the peso may have a negative impact on the ability of certain Argentine businesses to service their foreign currency-denominated debt, lead to inflation, significantly reduce real wages and jeopardize the stability of businesses, such as ours, whose success depends on domestic market demand and adversely affect the Argentine governments ability to honor its foreign debt obligations. After several years of moderate variations in the nominal exchange rate, the peso depreciated more than 30% with respect to the U.S. dollar in each of 2013 and 2014. In 2015, the peso depreciated approximately 52% with respect to the U.S. dollar, including a 10% depreciation from January 1, 2015 to September 30, 2015 and a 38% depreciation during the last quarter of the year, mainly concentrated after December 16, 2015 once the Macri administration eliminated exchange controls imposed by the prior administration. In 2016, 2017 and 2018, the peso depreciated approximately 21.86%, 17.36% and 102.16% respectively, in each case, with respect to the U.S. dollar. The peso depreciated approximately 19.10% from December 28, 2018 through April 25, 2019. On April 25, 2019, the exchange rate was Ps. 44.90 to US$1.00, as quoted by the Banco de la Nación Argentina for wire transfers (divisas).
 
As a result of the increased volatility of the Argentine peso (see “Item 3.A. Selected Financial Data—Exchange Rates”), the Argentine government announced several measures aimed at restoring market’s confidence and stabilize the value of the Argentine peso. Measures implemented by the Argentine government include, among others, the 2018 IMF Agreement (see “Item 4. Information of the CompanyRecent Political and Economic Developments in Argentina— IMF Agreement”), increase of interest rates and sale of the Central Bank’s foreign currency reserves. More recently, and by virtue of the 2018 IMF Agreement, a new regime was established. This regime sets forth a strict control of the local monetary base, in an attempt to reduce the demand for foreign currency. As of October 1, 2018, the BCRA introduced an exchange rate band. The peso’s exchange rate with the U.S. Dollar was allowed to fluctuate between Ps.34.00 and Ps.44.00 per US$1.00 (range that was adjusted daily at an annual rate of 3% until December 2018, and for the first quarter of 2019, is adjusted daily at an annual rate of 2%) without the BCRA’s intervention. On April 29, 2019, the Monetary Policy Counsel (Comité de Política Monetaria) of the Central Bank (the “COPOM”) decided to introduce changes to the monetary policy, with an aim to reducing volatility in the foreign exchange market. According to the new scheme: (i) if the exchange rate is between Ps. 39.755 and Ps. 51.488, the Central Bank may intervene, subject to market conditions, in the foreign exchange market and sell U.S. dollars in the market, and (ii) if the exchange rate is above Ps. 51.488, the Central Bank will sell foreign currency for up to 250 million U.S. dollars daily. Also, the Central Bank could decide to perform additional interventions. The Argentine pesos resulting from such sales will be discounted from the monetary base. The COPOM also confirmed that the Central Bank will not intervene until June 2019 in the foreign exchange market if the exchange rate decreases below Ps. 39.755.
 
The Argentine macroeconomic environment, in which we operate, was affected by the depreciation referred to above, which had an effect on our financial and economic position. If the Peso depreciates further, all of the negative effects on the Argentine economy related to such depreciation could recur, with adverse consequences to our business, financial condition and results of operations. In addition, we cannot predict whether the Argentine government will be able to comply with all terms of the 2018 IMF Agreement. The ability of the Argentine government to stabilize the foreign exchange market, restore economic growth and meet the terms of the 2018 IMF Agreement, is uncertain.
 
In addition, the Republic’s future tax revenue and fiscal results may be insufficient to meet its debt service obligations and the Republic may have to rely in part on additional financing from domestic and international capital markets, the IMF and other potential creditors, in order to meet future debt service obligations. In the future, the Republic may not be able or willing to access international or domestic capital markets, which could have a material adverse effect on the Republic’s ability to make payments on its outstanding public debt, and in turn, could materially adversely affect our financial condition and results of operations.
 
Government intervention may adversely affect the Argentine economy and, as a result, our business and results of operations
 
The two administrations of President Fernández de Kirchner, who governed from 2007 through December 9, 2015, increased state intervention in the Argentine economy, including through expropriation and nationalization measures, price controls and pervasive exchange controls.
 
In 2008, the Fernández de Kirchner administration absorbed and replaced the former private pension system for 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 Garant’a de Sustentabilidad, or the FGS) to be administered by the National Social Security Administration (Administración Nacional de la Seguridad Social, or 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. Debt and equity instruments that previously could be placed with pension fund administrators are now entirely subject to the discretion of the ANSES. Since acquiring equity interests in privately owned companies, through the process of replacing the pension system, the ANSES is entitled to designate representatives of the Argentine government to the boards of directors of those entities. Pursuant to Decree No. 1,278/12, issued by the executive branch on July 25, 2012, the ANSESs representatives must report directly to the Ministry of Economy and are subject to a mandatory information-sharing regime, under which, among other obligations, the representatives must immediately inform the Ministry of Economy of the agenda for each board of directors meeting and provide related documentation.
 
 
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In December 2012 and August 2013, the National Congress established new regulations related to domestic capital markets. In general, these regulations allowed greater national government intervention in the capital markets, authorizing, for example, the CNV to designate inspectors with the ability to veto, under certain circumstances, the decisions of the board of directors of companies that are listed in authorized markets and such companies’ board of directors for a period of up to 180 days. On November 17, 2016, the Macri government presented a bill to the National Congress to amend the Capital Markets Law, which could, among other significant changes, eliminate such powers to designate inspectors and suspend the board of directors for a period of up to 180 days.
 
In May 2013, the Argentine Congress passed a law providing for the expropriation of 51% of the share capital of YPF (Yacimientos Petroliferos Fiscales S.A.), the principal Argentine oil company, which shares were owned by Repsol, S.A. and its affiliates. In February 2015, the Argentine government sent a bill to the Argentine Congress in order to revoke certain train concessions, return the national rail network to state control and provide authority to review all concessions currently in effect. The bill was enacted on May 20, 2015 as Law No. 27,132.
 
In addition, on September 23, 2015 the Argentine Congress passed Law No. 27,181, which limits the sale of the Argentine government’s shares held in Argentine companies without prior approval of two-thirds of the members of the Argentine Congress, with the exception of the Argentine government’s shareholding in YPF. That law has been abrogated by the new Administration through Law No. 27,260, the “Ley de Sinceramiento Fiscal y Reparación Histórica a los Jubilados”, dated on May 26, 2016.
 
Notwithstanding the measures recently adopted by the Macri administration, in the future, the Argentine government could re-introduce regulations that result in an increased government intervention. It is widely reported by private sector economists that expropriations, price controls, exchange controls and other direct involvement by the Fernández de Kirchner administration in the economy had an adverse impact on the level of investment in Argentina, the access of Argentine companies to the international capital markets and Argentinas commercial and diplomatic relations with other countries. Further actions taken by the Argentine government concerning the economy, including decisions with respect to interest rates, taxes, price controls, salary increases, provision of additional employee benefits and foreign exchange controls could continue to have a material adverse effect on Argentinas economic growth and in turn affect our financial condition and results of operations. Moreover, any additional Argentine government policies established to preempt, or in response to, social unrest could adversely and materially affect the economy, and therefore our business, results of operations and financial condition.
 
Government measures, as well as pressure from labor unions, could require salary increases or added benefits, all of which could increase companies’ operating costs
 
In the past, the Argentine government has passed laws and regulations forcing privately owned companies to maintain certain wage levels and provide added benefits for their employees. Additionally, both public and private sector employers have been subject to strong pressure from the workforce and trade unions to grant salary increases and certain benefits. See “—Risks Relating to Our BusinessWe could be affected by material actions taken by the trade unions.
 
Labor relations in Argentina are governed by specific legislation, such as Labor Law No. 20,744 and Collective Bargaining Law No. 14,250, which, among other things, dictate how salary and other labor negotiations are to be conducted. Every industrial or commercial activity is regulated by a specific collective bargaining agreement (CBA) that groups companies together according to industry sector and trade union. Although the process of negotiation is standardized, each chamber of industrial or commercial activity separately negotiates the increases of salaries and labor benefits with the relevant trade union of such commercial or industrial activity.
 
Argentine employers, both in the public and private sectors, have experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. In August 2012, the Argentine government established a 25% increase in minimum monthly salary to Ps.2,875, effective as of February 2013. The Argentine government increased the minimum salary to Ps.3,300 in August 2013, to Ps.3,600 in January 2014, to Ps.4,400 in September 2014 and to Ps.5,588 in August 2015. It further decreed an increase of the minimum salary to Ps.6,060 in January 2016, to Ps.6,810 in June 2016, to Ps.7,560 in September 2016 and to Ps.8,060 in January 2017. In June 2017, the Ministry of Labor raised the minimum salary to Ps.10,000, effective in three tranches: Ps.8,860 as of July 2017, Ps.9,500 as of January 2018, and Ps.10,000 as of July 2018. In August 2018, the Ministry of Labor raised the minimum salary to Ps. 10,700 as of September 2018, Ps. 11,300 as of December 2018, and Ps. 12,500 as of March 2019. Due to high levels of inflation, both public and private sector employers are experiencing significant pressure from unions and their employees to further increase salaries. In 2015, the INDEC published the Coeficiente de Variación Salarial (Salary Variation Index, or the CVS), an index that shows the evolution of salaries. The Salaries Index showed an increase of approximately 27.30% and 30.41% in registered private sector salaries in 2017 and 2018, respectively.
 
 
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In the future, the Argentine government could take new measures requiring salary increases or additional benefits for workers, and the labor force and labor unions may apply pressure for such measures. Any such increase in wage or worker benefit could result in added costs and reduced results of operations for Argentine companies, including us. Such added costs could adversely affect our business, financial condition and result of operations.
 
The implementation of new exchange controls and restrictions on capital inflows and outflows could limit the availability of international credit and could threaten the financial system, adversely affecting the Argentine economy and, as a result, our business
 
In 2001 and 2002, Argentina imposed exchange controls and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments abroad. After 2002, these restrictions, including those requiring the Central Banks prior authorization for the transfer of funds abroad to pay principal and interest on debt obligations, were substantially eased through 2007. In addition to the foreign exchange restrictions applicable to outflows, in June 2005 the Argentine government adopted various rules and regulations that established restrictive controls on capital inflows into Argentina, including a requirement that, for certain funds remitted into Argentina, an amount equal to 30% of the funds must be deposited into an account with a local financial institution as a U.S. dollar deposit for a one-year period without any accrual of interest, benefit or other use as collateral for any transaction.
 
From 2011 and until President Macri assumed office in December 2015, the Argentine government increased controls on the sale of foreign currency and the acquisition of foreign assets by local residents, limiting the possibility of transferring funds abroad. Furthermore, under regulations issued since 2012 certain foreign exchange transactions were subject to prior approval by the Federal Administration of Public Income (AFIP). Through a combination of foreign exchange and tax regulations, the Fernández de Kirchner administration significantly curtailed access to the MULC by individuals and private-sector entities. In addition, during the last few years under the Fernández de Kirchner administration, the Central Bank exercised a de facto prior approval power for certain foreign exchange transactions otherwise authorized to be carried out under the applicable regulations, such as dividend payments or repayment of principal of intercompany loans as well as the import of goods, by means of regulating the amount of foreign currency available to companies to conduct such transactions. The number of exchange controls introduced in the past and in particular after 2011 during the Fernández de Kirchner administration gave rise to an unofficial U.S. dollar trading market, and the peso/U.S. dollar exchange rate in such market substantially differed from the official peso/U.S. dollar exchange rate. See Exchange Controls.
 
Additionally, the level of international reserves deposited with the Central Bank significantly decreased from US$47.4 billion as of November 1, 2011 to US$25.6 billion as of December 31, 2015, resulting in a reduced capacity of the Argentine government to intervene in the MULC and to provide access to such markets to private sector entities like us. The Macri administration announced a program intended to increase the level of international reserves deposited with the Central Bank through the execution of certain agreements with several Argentine and foreign entities. As a result of the measures taken under such program and due to the issuance by the Argentine government of US$16.5 billion and US$2.75 billion of new debt securities in the international capital markets on April 22, 2016 and July 6, 2016, respectively, the level of international reserves increased to US$38.8 billion as of December 31, 2016. As of December 31, 2018, the level of international reserves of the Central Bank totaled US$65.8 billion.
 
Since assuming office, the Macri administration gradually implemented a series of reforms related to the foreign exchange restrictions, including certain currency controls, which had been imposed under the Fernández de Kirchner administration, in order to provide greater flexibility and access to the MULC. On August 8, 2016 the Central Bank issued Communication A 6037, which substantially modified the applicable foreign exchange regulations and eliminated the set of restrictions for accessing the MULC. Effective as of July 1, 2017, pursuant to Communication A 6244, all regulations that restricted access to the MULC were repealed, leaving in place only the obligation to comply with a reporting regime. Pursuant to Communication A 6401, dated December 26, 2017, a new reporting regime was created, pursuant to which the Survey on the issuance of foreign notes and liabilities by the financial and private non-financial sector, established by Communication A 3602, and the Survey on direct investments, established by Communication A 4237, were replaced by a unified report on direct investments and debt. Moreover, by virtue of Communication “A” 6443, which came into force as of March 1, 2018, any company from any sector, which usually operates through the Exchange Market can act as an exchange agency by only registering in the exchange operators’ registry. Argentine residents must comply with the reporting regime, even when the funds have not been sold in the MULC and/or there is no expectation to access the MULC in the future in relation to the funds that must be reported. For further information, see Exchange Controls.
 
 
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Notwithstanding the measures adopted by the Argentine government, in the future the Argentine government could impose further exchange controls, transfer restrictions or restrictions on the movement of capital and/or take other measures in response to capital flight or a significant depreciation of the peso, which could limit our ability to access the international capital markets and impair our ability to make interest, principal or dividend payments abroad. Such measures could lead to renewed political and social tensions and undermine the Argentine governments public finances, which could adversely affect Argentinas economy and prospects for economic growth and, consequently, adversely affect our business and results of operations.
 
A lack of financing for Argentine companies due to the unresolved litigation with holdout bondholders may negatively impact our financial condition or cash flows
 
In 2005 and 2010, Argentina conducted exchange offers to restructure part of its sovereign debt that had been in default since the end of 2001. As a result of these exchange offers, Argentina restructured over 92% of its eligible defaulted debt.
 
Commencing in 2002, holdout creditors filed numerous lawsuits against Argentina in several jurisdictions, including the United States, Italy, Germany and Japan. These lawsuits generally assert that Argentina failed to make timely payments of interest and/or principal on their bonds, and seek judgments for the outstanding principal of and/or accrued interest on those bonds. Judgments have been issued in numerous proceedings in the United States and Germany, but to date creditors have not succeeded, with a few minor exceptions, in executing those judgments. In 2012, plaintiffs in New York obtained a U.S. district court order enjoining Argentina from making interest payments in full on the bonds issued pursuant to the 2005 and 2010 exchange offers unless Argentina paid the plaintiffs in full, under the theory that the former payments violated the pari passu clause in the 1994 Fiscal Agency Agreement (the FAA) governing those non-performing bonds. The Second Circuit Court of Appeals affirmed the so-called pari passu injunctions, and on June 16, 2014 the U.S. Supreme Court denied Argentinas petition for a writ of certiorari and the pari passu injunctions became effective on June 18 of that year.
 
In 2014, the Argentine government took a number of steps intended to continue servicing the bonds issued in the 2005 and 2010 exchange offers, which had limited success.
 
The Argentine government engaged in negotiations with holders of defaulted bonds in December 2015 with a view to bringing closure to fifteen years of litigation. In February 2016, the Argentine government entered into an agreement in principle to settle with certain holders of defaulted debt and put forward a proposal to other holders of defaulted debt, including those with pending claims in U.S. courts, subject to two conditions: (i) obtaining approval by the Argentine Congress and the lifting of the pari passu injunctions. On March 2, 2016, the U.S. district court agreed to vacate the pari passu injunctions, subject to two conditions: first, the repeal of all legislative obstacles to settlement with holders of defaulted debt securities issued under the FAA; and (ii) full payment to holders of pari passu injunctions with whom the Argentine government had entered into an agreement in principle on or before February 29, 2016. The U.S. district courts order was affirmed by the Second Circuit Court of Appeals on April 13, 2016. On June 30, 2016, the Argentine Congress repealed the legislative obstacles to the settlement and approved the settlement proposal. On April 22, 2016, Argentina issued US$16.5 billion of new debt securities in the international capital markets, and applied US$9.3 billion of these proceeds to satisfy settlement payments on agreements with holders with claims amounting to approximately US$4.2 billion. The District Court ordered the vacatur of all pari passu injunctions upon confirmation of such payments.
 
As of the date of this annual report, litigation initiated by bondholders that have not accepted Argentinas settlement offer continues in several jurisdictions, although the size of the claims involved has decreased significantly.
 
Although the vacatur of the pari passu injunctions removed a material obstacle to access to capital markets by the Argentine government, future transactions may be affected as litigation with holdout bondholders continues, which in turn could affect the Argentine governments ability to access international credit markets, thus affecting our ability to finance our growth.
 
High public expenditures could result in long-lasting adverse consequences for the Argentine economy
 
In recent years, the Argentine government has substantially increased public expenditures. In 2016 and 2017, national public sector expenditures increased by 37.0% and 21.8% year over year, respectively (measured in nominal Argentine pesos) and the government reported a primary fiscal deficit of 4.6% and 3.8% of GDP, according to the Argentine Ministry of Treasury. In 2018, national public sector expenditures increased by 22.4%, and the government reported a primary fiscal deficit of 2.4% of GDP. During recent years, the Argentine government has resorted to the Central Bank and to the ANSES to alleviate part of its funding requirements. Moreover, the primary fiscal balance could be negatively affected in the future if public expenditures continue to increase at a rate higher than revenues due to, for example, social security benefits, financial assistance to provinces with financial problems and increased spending on public works and subsidies, including subsidies to the energy and transportation sectors. A further deterioration in fiscal accounts could negatively affect the governments ability to access the long-term financial markets and could in turn result in more limited access to such markets by Argentine companies. Additionally, a further deterioration in fiscal accounts could affect the Argentine governments ability to continue subsidies for consumers in the energy sector.
 
 
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A decline in international prices for Argentina’s main commodity exports could have an adverse effect on Argentina’s economic growth
 
Argentinas financial recovery from the 2001-2002 crisis occurred in a context of price increases for Argentinas commodity exports, such as soy. High commodity prices contributed to the increase in Argentine exports since the third quarter of 2002 and to high government tax on revenues from export withholdings. However, the reliance on the export of certain commodities has caused the Argentine economy to be more vulnerable to fluctuations in their prices.
 
Commodity prices, including for soy, have declined significantly since peak prices due in part to slower growth in China. In addition, from the end of 2017 until April 2018, rains below the average, for several months, plunged Argentina into a severe drought that is presumed to have been the worst drought in the country in a 50 years period. The effects of the drought in agriculture caused important economic problems in the country, with a fall in the soybean harvest of 31% over the previous year, and corn, by 20%, which implied losses by US$6 billion. A continuing decline in the international prices for Argentinas main commodity exports or any future climatic conditions that may have an adverse effect in agriculture could have a negative impact on the levels of government revenues and the governments ability to service its sovereign debt, and could either generate recessionary or inflationary pressures, depending on the governments reaction. Either of these results would adversely impact Argentinas economy and, therefore, our financial condition.
 
The Argentine economy could be adversely affected by economic developments in other markets and by more general “contagion” effects
 
Weak, flat or negative economic growth of any of Argentinas major trading partners, such as Brazil, China or the United States, could have a material adverse effect on Argentina’s trade balance and adversely affect Argentina’s economic growth. The economic performance of other trading partners such as Chile, Spain and Canada may also affect Argentina’s trade balance.
 
The economy of Brazil, Argentinas largest export market and the principal source of imports, has experienced heightened negative pressure due to the uncertainties stemming from ongoing political crisis and extensive corruption investigations. The Brazilian economy contracted by 3.6% during 2016. Although the Brazilian economy slightly expanded by 1% during 2017 and 1.1% during 2018, a deterioration of economic conditions in Brazil may reduce demand for Argentine exports and create advantages for Brazilian imports. In October 2018, candidate Jair Bolsonaro was elected president of Brazil. As a result, uncertainty and expectations have increased in relation to the future management of the president who, might include substantial economic reforms and changes in Brazil’s foreign policy, as stated during his campaign. A further deterioration of economic conditions in Brazil could reduce the demand for Argentine exports and generate advantages for Brazilian imports. There is a possibility that continued uncertainty with respect to Brazil’s economic and political conditions or the occurrence of an economic and political crisis in Brazil might result in an impact on the Argentine economy, and in turn, have a material adverse effect on our business, financial condition and result of operations.
 
The Argentine economy may be affected by contagion effects. International investors reactions to events occurring in one developing country sometimes appear to follow a contagion pattern, in which an entire region or investment class is disfavored by international investors. In the past, the Argentine economy has been adversely affected by such contagion effects on a number of occasions, including the 1994 Mexican financial crisis, the 1997 Asian financial crisis, the 1998 Russian financial crisis, the 1999 depreciation of the Brazilian real, the 2001 collapse of Turkeys fixed exchange rate regime and the global financial crisis that began in 2008.
 
The Argentine economy may also be affected by conditions in developed economies, such as the United States, that are significant trading partners of Argentina or have influence over world economic cycles. If interest rates increase significantly in developed economies, including the United States, Argentina and its developing economy trading partners, such as Brazil, could find it more difficult and expensive to borrow capital and refinance existing debt, which could adversely affect economic growth in those countries. Decreased growth on the part of Argentinas trading partners could have a material adverse effect on the markets for Argentinas exports and, in turn, adversely affect economic growth. Any of these potential risks to the Argentine economy could have a material adverse effect on our business, financial condition and result of operations.
 
On June 23, 2016, the United Kingdom voted in favor of exiting the European Union. As of the date of this annual report, the actions that the United Kingdom will take to effectively exit from the European Union or the length of such process are uncertain. The results of the United Kingdoms referendum have caused, and are anticipated to continue causing, volatility in the financial markets, which may in turn have a material adverse effect on our business, financial condition and results of operations. The UK is due to leave the EU on 29 March 2019 at 11 pm UK time, when the period for negotiating a Withdrawal Agreement will end unless an extension is agreed. Brexit could lead to additional political, legal and economic instability in the European Union and produce a negative impact on the commercial exchange of Argentina with that region.
 
 
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On November 8, 2016, Mr. Donald J. Trump was elected president of the United States. The results of the presidential election have created significant uncertainty about the future relationship between the United States and other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade between the United States and other nations. Even though President Trump's protectionist measures are not, for the time being, aimed at Argentina, we cannot predict how they will evolve, nor will the effect that the same or any other measure taken by the Trump administration could cause on global economic conditions and the stability of global financial markets. Furthermore, the ongoing trade dispute between United States and China due to tariffs placed on goods traded between them, might have a potential impact in trade-dependent countries such as Argentina.
 
During August 2018, an increase in inflation and a sustained deficit in current accounts, as well as the protectionist measures taken by the United States, doubling the tariffs on steel and aluminum from Turkey, caused a collapse of the Turkish lira against the Dollar that triggered a wave of sales of assets from emerging markets and the significant fall in the prices of shares from these markets, generating a contagion effect in international markets and several stock exchanges in the world, including Argentina.
 
These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could depress economic activity and restrict our access to suppliers and have a material adverse effect on our business, financial condition and results of operations.
 
The Argentine banking system may be subject to instability which may affect our operations
 
The Argentine banking system has experienced several crisis in the past. Among those, the Argentine banking system collapsed in 2001 and 2002, when the Argentine government restricted bank withdrawals and required mandatory conversion of dollar deposits to pesos. From 2005 to 2007, a period of economic growth coupled with relative stability of the country’s exchange rate and inflation resulted in the restoration of public confidence, a gradual accumulation of deposits in Argentine financial institutions, and improved liquidity of the financial system. However, since 2008 certain events such as internal conflicts with certain sectors of the Argentine economy, the international financial crisis and the increased regulation on the foreign exchange market, have decreased depositors’ confidence. In recent years, the Argentine financial system grew significantly with a marked increase in loans and private deposits, showing a recovery of credit activity. In spite of the fact that the financial system’s deposits continue to grow, they are mostly short-term deposits and the sources of medium and long-term funding for financial institutions are currently limited. In 2018, private deposits in pesos rose by 41% year-over-year, fueled by the growth of time deposits with a 66% increase, while savings and current accounts each experienced a 23% increase year-over-year. In contrast, peso-denominated loans increased at a slower pace than prior years. Meanwhile, loans in foreign currency (composed mainly of corporate loans) showed less dynamism, increasing by 4% at the end of 2018.
 
Financial institutions are particularly subject to significant regulation from multiple regulatory authorities, all of whom may, among other things, establish limits on commissions and impose sanctions on the financial institutions. The lack of a stable regulatory framework could impose significant limitations on the activities of the financial institutions and could induce uncertainty with respect to the financial system stability.
 
Despite the strong liquidity currently prevailing in Argentina’s financial system, a new crisis or the consequent instability of one or more of the larger banks, public or private, could have a material adverse effect on the prospects for economic growth and political stability in Argentina, resulting in a loss of consumer confidence, lower disposable income and fewer financing alternatives for consumers. These conditions would have a material adverse effect on us.
 
Exchange controls and restrictions on transfers abroad and capital inflows have limited, and could limit in the future, the availability of international credit.
 
Failure to adequately address actual and perceived risks of institutional deterioration and corruption may adversely affect Argentina’s economy and financial condition, which in turn could adversely affect our business, financial condition and results of operations
 
A lack of a solid institutional framework and corruption have been identified as, and continue to be a significant problem for Argentina. In Transparency International’s 2017 Corruption Perceptions Index survey of 180 countries, Argentina was ranked 85, improving from the previous survey in 2016. In the World Bank’s Doing Business 2018 report, Argentina ranked 117 out of 190 countries, down from 116 in 2017.
 
 
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Recognizing that the failure to address these issues could increase the risk of political instability, distort decision-making processes and adversely affect Argentina’s international reputation and ability to attract foreign investment, the Macri administration has announced several measures aimed at strengthening Argentina’s institutions and reducing corruption. These measures include the reduction of criminal sentences in exchange for cooperation with the government in corruption investigations, increased access to public information, the seizing of assets from corrupt officials, increasing the powers of the Anticorruption Office (Oficina Anticorrupción) and the passing of a new public ethics law, among others. The Argentine government’s ability to implement these initiatives is uncertain as it would require the involvement of the judicial branch, which is independent, as well as legislative support from opposition parties.
 
Argentina’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities with underlying Argentine risk. The recent economic instability in Argentina has contributed to a decline in market confidence in the Argentine economy as well as to a deteriorating political environment. Weak macroeconomic conditions in Argentina have continued in 2018 and may be accentuated in 2019 as a result of the upcoming presidential and congressional elections.
 
In addition, various ongoing investigations into allegations of money laundering and corruption being conducted by the Office of the Argentine Federal Prosecutor, including the largest such investigation, known as “Los Cuadernos de las Coimas,” or “the Chauffeur's Books” have negatively impacted the Argentine economy and political environment. Certain government officials of the Kirchner and Fernández de Kirchner administrations as well as high ranked officers of companies holding government contracts or concessions have faced or are currently facing allegations of corruption and money laundering as a result of these investigations. These individuals are alleged to have accepted or paid, as applicable, bribes by means of kickbacks on contracts granted by the government to several infrastructure, energy and construction companies. The proceeds from these kickbacks allegedly financed the political campaigns of political parties forming the previous government that was led by former President Cristina Fernandez de Kirchner. These funds were unaccounted for or not publicly disclosed and were allegedly used to personally enrich certain individuals. Several senior politicians, including members of Congress, and high-ranking executives and officers of major companies in Argentina (i) have been arrested on account of various charges relating to corruption, (ii) entered into plea agreements with prosecutors and (iii) have resigned or been removed from their positions. The potential outcome of the Chauffer’s Books as well as other ongoing corruption-related investigations is uncertain, but they have already had an adverse impact on the reputation of those companies that have been implicated, as well as on the general market perception of the economy, political environment and the capital markets in Argentina. We have no control over and cannot predict for how long the corruption investigations will continue nor whether such investigations or allegations (or any other future investigations or allegations) will lead to further political and economic instability. In addition, we cannot predict the outcome of any such allegations nor their effect on the different sectors of the Argentine economy. See also “We are subject to anticorruption, anti-bribery, anti-money laundering and other laws and regulations.”
 
Risks Relating to the Electric Power Sector in Argentina
 
The Argentine government has intervened in the electric power sector in the past, and is likely to continue intervening
 
Historically, the Argentine government has played an active role in the electric power industry through the ownership and management of state-owned companies engaged in the generation, transmission and distribution of electric power. Since 1992 and the privatization of several state-owned companies, the Argentine government has reduced its control over the industry. However, as is the case in most other countries, the Argentine electric power industry remains subject to strict regulation and government intervention. Moreover, to address the Argentine economic crisis of 2001 and 2002, the Argentine government adopted Law No. 25,561 (the Public Emergency Law) and other regulations, which made a number of material changes to the regulatory framework applicable to the electric power sector. These changes have had significant adverse effects on electric power generation, distribution and transmission companies and included the freezing of distribution margins, the revocation of adjustment and inflation indexation mechanisms for tariffs, a limitation on the ability of electric power distribution companies to pass on to the consumer increases in costs due to regulatory charges and the introduction of a new price-setting mechanism in the WEM, all of which had a significant impact on electric power generators and caused substantial price differences within the market.
 
The Fernández de Kirchner administration continued to intervene in the electric power industry by, for example, granting temporary margin increases, proposing a new tariff regime for residents of poverty-stricken areas, increasing remunerations earned by generators for capacity, operation and maintenance services, creating specific charges to raise funds that are transferred to government-managed trust funds that finance investments in generation and distribution infrastructure and mandating investments for the construction of new generation plants and the expansion of existing transmission and distribution networks.
 
 
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For example, in March 2013, pursuant to Resolution No. 95/13, issued by the former Secretariat of Energy, the Fernández de Kirchner administration suspended the renewal of sales contracts in the term market and execution of new agreements in the WEM, and ordered that any demand not satisfied by Argentine generators must be directly supplied by CAMMESA. As a result, Argentine generators are required to supply capacity and energy to CAMMESA at prices fixed by the former Secretariat of Energy.
 
Since the Macri administration assumed office, the Argentine government has initiated significant reforms to the Argentine electric power industry. On December 16, 2015, the Macri administration declared a state of emergency with respect to the national electric power system that remained in effect until December 31, 2017. The state of emergency allowed the Argentine government to take actions designed to guarantee the supply of electric power in Argentina, such as instructing the Ministry of Energy and Mining to elaborate and implement, with the cooperation of all federal public entities, a coordinated program to guarantee the quality and security of the electric power system and rationalize public entities consumption of energy. In addition, the Argentine government and certain provincial governments have approved significant price adjustments and tariff increases applicable to certain generation and distribution companies. Following the tariff increases, preliminary injunctions suspending such increases were requested by customers, politicians and non-governmental organizations that defend customers rights, which preliminary injunctions were granted by Argentine courts. Among the different rulings in this respect, two recent rulings issued by the Second Division of the Federal Court of Appeals for the City of La Plata and a federal judge from the San Martín district court led to the suspension of end-users tariff increases of electric power in the Province of Buenos Aires and in the whole territory of Argentina, respectively. Pursuant to these injunctions, (i) the end-user tariff increases granted as of February 1, 2016 were suspended retroactively to that date, (ii) end-user bills sent to customers were not to include the increase and (iii) the amounts already collected from end-users as a consequence of consumption recorded before these rulings had to be reimbursed. However, on September 6, 2016, the Supreme Court denied these injunctions that suspended end-users electric power tariff increases, arguing formal objections and procedural defects and therefore, as of the date of this annual report, increases of the electric power end-users tariffs are not suspended.
 
Pursuant to Resolution No. 522/16, the ENRE ordered a public hearing to be held to evaluate the proposals for the full tariff review filed by EDENOR and EDESUR for the period from January 1, 2017 to December 31, 2021. The hearing was held on October 28, 2016. A non-binding public hearing was conducted by the Ministry of Energy and Mining and the ENRE to discuss tariff proposals submitted by distribution companies covering the greater Buenos Aires area (with approximately 15 million inhabitants), including Edenor, for the 2017-2021 period within the framework of the RTI. Following such hearing, on January 31, 2017, the ENRE issued Resolution No. 63/17, pursuant to which such administrative authority approved the tariffs to be applied by EDENOR. In the same sense, Resolution No. 64/17 approved EDESURs tariffs.
 
On February 1, 2017, the ENRE enacted several resolutions, which, among other policy changes, implemented a reduction of electric power tariff subsidies and an increase in electric power tariffs for residential customers. Such increases ranged between 61% and 148%, depending on to the amount of the consumers electric power consumption.
 
Regarding transmission tariffs, seven public hearings were held pursuant to Resolutions Nos. 601/16, 602/16, 603/16, 604/16, 605/16, 606/16 and 607/16 of the ENRE. In such public hearings, the tariff proposals filed by transmission companies Transener S.A., Distrocuyo S.A., Transcomahue S.A., Ente Provincial de Energía de Neuquén, Transba S.A., Transnea S.A., Transnoa S.A. and Transpa S.A. for the period from January 1, 2017 to December 31, 2021 were evaluated. Pursuant to Resolutions Nos. 66/17, 68/17, 69/17, 71/17, 73/17, 75/17, 77/17 and 79/17, the ENRE approved the new applicable tariffs for such companies.
 
Additionally, in March 2016, the Secretariat of Electric Energy enacted Resolution SEE No. 22/16, through which it adjusted the electric power prices for the sale of energy by generation companies under the Energía Base. See See Managements Discussion and Analysis of Financial Condition and Results of OperationsFactors Affecting Our Results of OperationsOur RevenuesThe Energía Base. The Secretariat of Electric Energy cited the fact that WEM prices have been distorted and discourage private sector investment in power generation and that it was necessary to raise tariffs to partially compensate for increasing operation and maintenance costs and to improve the cash flow generation capacity of these companies. On February 1, 2017, the tariff revision process was completed and the new tariff scheme for the following five-year period was enacted.
 
In a change of its criteria on policies applied in the electric power industry, on April 17, 2019, the Macri Administration announced that the tariffs applied by electricity distribution companies will not be increased during the rest of 2019.
 
In addition, by means of Resolution SRRyME No. 1/19, the Argentine Government reduced prices for power capacity and energy under Energía Base, which had been previously increased by Resolution SEE No. 19/17. This change was defined as a transition measure by the recitals of Resolution SRRyME No. 1/19. However, we cannot assure you that further reductions of these tariffs will not occur in the future. Moreover, although under Resolution SRRyME No. 1/19 power capacity and energy tariffs are set in U.S. dollars, we cannot assure that Energía Base prices in the future will remain denominated in this currency.
 
 
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The Argentine government has also established public bidding processes for the development of new generation projects from both thermal and renewable sources. These measures aim not only to satisfy domestic electric power demand, but also to promote investments in the electric power sector and improve the economic situation of the WEM, which, as discussed above, has faced challenges since 2001.
 
Notwithstanding the recent measures adopted by the Argentine government, we cannot guarantee that the expected changes to the electric power sector will happen as expected, within the anticipated timeframe or at all. It is possible that certain measures may be adopted by the Argentine government that could have a material adverse effect on our business and results of operations, or that the Argentine government may adopt emergency legislation similar to the Public Emergency Law or other similar resolutions in the future that could have a direct impact on the regulatory framework of the electric power industry and indirectly adversely affect the electric power generation industry, and therefore, our business, financial condition and results of operations.
 
Electricity generators, distributors and transmitters have been materially and adversely affected by emergency measures adopted in response to Argentina’s economic crisis of 2001 and 2002, many of which remain in effect
 
Since the Argentine economic crisis of 2001 and 2002, Argentinas electric power sector has been characterized by government regulations and policies that have resulted in significant distortions in the electric power market, particularly with respect to prices, throughout the whole value chain of the sector (generation, transmission and distribution). Historically, Argentine electric power prices were calculated in U.S. dollars and margins were adjusted periodically to reflect variations in relation to costs. In January 2002, the Public Emergency Law authorized the Argentine government to renegotiate its public utility contracts. Under this law, the Argentine government revoked provisions in the public utility contracts related to the adjustment and inflation indexation mechanism. Instead, the tariffs on such contracts were frozen and converted from their original U.S. dollar values to Argentine pesos at a rate of Ps.1.00 per US$1.00. For further information on the changes to the legal framework of the Argentine electric power industry caused by the Public Emergency Law, see The Argentine Electric Power Sector.
 
These measures, coupled with the effect of high inflation and the depreciation of the peso in recent years, led to a significant decline in revenues and a significant increase of costs in real terms, which could no longer be recovered through margin adjustments or market price-setting mechanisms. This situation, in turn, led many public utility companies to suspend payments on their financial debt (which continued to be denominated in U.S. dollars despite the pesification of revenues), effectively preventing these companies from obtaining further financing in the domestic or international credit markets and making additional investments.
 
After declaring a state of emergency with respect to the national electrical system, the Argentine government increased electric power tariffs in the WEM under the Energía Base. Preliminary injunctions suspending such increases were requested by customers, politicians and non-governmental organizations, and recent rulings suspended the increases in the whole territory of Argentina. On September 6, 2016, the Supreme Court denied these injunctions that suspended end-users electric power tariff increases, and a public hearing to evaluate the proposals for a full tariff review filed by EDENOR and EDESUR was held on October 28, 2016. The tariff increases were approved on January 31, 2017. In addition, the Argentine government issued Resolution SE No. 21/16 calling for a public bid process for the installation of new generation capacity from both thermal and renewable sources, offering generators U.S. dollar-denominated rates linked to generation costs for newly available generation capacity. However, tariffs under the Energía Base remain well below historical levels, although there have been important increases and, they are now denominated in U.S. dollars which mitigates the effect of variations in the foreign exchange rate. These measures, or any future measures, may not be sufficient to address the structural problems created by the economic crisis of 2001 and 2002 and its aftermath, and measures similar to those adopted during the economic crisis may not be enacted in the future.
 
On March 1, 2019, by means of Resolution SRRyME No. 1/19, the Argentine Government reduced prices for power capacity and energy under Energía Base, which had been previously increased by Resolution SEE No. 19/17. This change was defined as a transition measure by the recitals of Resolution SRRyME No. 1/19. However, we cannot assure you that further reductions of these tariffs will not occur. Moreover, although under Resolution SRRyME No. 1/19 power capacity and energy tariffs are set in U.S. dollars, we cannot assure you that Energía Base prices in the future will remain denominated in this currency. 
 
 
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We have, in the recent past, been unable to collect payments, or to collect them in a timely manner, from CAMMESA and other customers in the electric power sector
 
For the years ended December 31, 2018 and 2017, approximately 90.91% and 93.97%, respectively, of our revenues from continuing operations came from our sales to CAMMESA (under the Energía Base, Resolution. SEE 70/18, the spot market and remuneration under Resolution No. 724/2008, relating to agreements with CAMMESA to improve existing power generation capacity), or 90.91% in 2018 and 82.87% in 2017 over our total revenues, from both continuing and discontinuing operations. In addition, we receive significant cash flows from CAMMESA in connection with the FONINVEMEM and similar programs. Payments to us by CAMMESA, including installments in connection with returns from FONINVEMEM and similar programs, depend upon payments that CAMMESA in turn receives from other WEM agents such as electric power distributors as well as the Argentine government.
 
Regarding the CVO Agreement, effective as of March 20, 2018, CAMMESA granted the CVO Commercial Approval in the WEM, as a combined cycle, of the thermal plant Central Vuelta de Obligado, which entitled us to receive the collection of the trade receivables under the CVO Agreement. A PPA between the CVO Trust and CAMMESA, through which the CVO Trust makes energy sales and, consequently, receives the cash flow to pay the trade receivables, had to be signed in order to start the collections.
 
The PPA agreement was signed on February 7, 2019, with retroactive effect to March 20, 2018.
 
As a result, the original amortization schedule from the CVO Agreement is in full force and effect.
 
The unpaid installments corresponding to the March-December 2018 period add up to US$ 78.15 million (including VAT, corresponding to installments 1 to 10). As of the day of this annual report, we continue in negotiations with CAMMESA to collect such unpaid amounts as soon as possible, plus the accrued interest between each due date and the effective payment date.
 
Despite the referred unpaid installments, as of the date of this annual report, we received the payment related to January and February 2019 (corresponding to installments 11 and 12, respectively) pursuant to the CVO Agreement’s original disbursement schedule, at the exchange rate of the last date of each month, on its respective due dates, in March and April 2019, respectively.
 
We are also entitled to receive the foreign exchange difference accrued for the Energía Base and FONI trade receivables, between the last date of the month of each monthly transaction of Energía Base or FONI installment, and the day prior to the due date of such monthly transaction or installment. These amounts should be paid one day after the due date of the payment of each monthly transaction of Energía Base or FONI installment. However, for the January 2019 installment, with due date on March 14, 2019, the foreign exchange difference was payed on April 5, 2019. The foreign exchange difference on the February 2019 monthly transaction of Energía Base and FONI installments has not been collected as of the date of this annual report.
 
In recent years, due to regulatory conditions in Argentinas electric power sector that affected the profitability and economic viability of power utilities, certain WEM agents defaulted on their payments to CAMMESA, which adversely affected CAMMESAs ability to meet its payment obligations to electric power generators, including us. In the recent past, when CAMMESA experienced a lack of funds to pay to generators, a significant amount of unpaid balances were converted into LVFVD. See BusinessFONINVEMEM and Similar Programs. As a consequence of delays in payments that CAMMESA received from other WEM agents in the past, we also saw delays in the payments we received under the Energía Base, receiving payments from CAMMESA within approximately 90 days of month-end, rather than the required 42 days after the date of billing. Such payment delays resulted in higher working capital requirements that we would typically finance with our own financing sources. From September 2016 to November 2017 CAMMESA has paid without delays, and since then, there were short periods in which CAMMESA experienced delays in paying (for more information on the duration of these delays see “Item 11. Quantitative and Qualitative Disclosures about Market RiskCredit Risk”). For example, for the monthly transaction related to Energía Base of January 2019, with due date on March 13, 2019, we collected 50% on that date, 22% on March 19, 2019, 22% on April 1, 2019, and the rest on April 5, 2019. For the monthly transaction related to Energía Base of February 2019, with due date on April 11, 2019, we collected 41% on that date, and 20% on April 17, 2019, and we expect to collect the balance in the upcoming weeks. For these delays, we are entitled to receive interests from CAMMESA. Payments related to PPAs under the Renovar Regulatory Framework have not suffered delays. CAMMESA may once again be unable to make payments to generators both in respect of energy dispatched and generation capacity availability on a timely basis or in full, which may substantially and adversely affect our financial position and the results of our operations.
 
 
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Electricity demand may be affected by tariff increases, which could lead generation companies like us to record lower revenues
 
During the 2001 and 2002 economic crisis, electric power demand in Argentina decreased due to the decline in the overall level of economic activity and the deterioration in the ability of many consumers to pay their electric power bills. In the years following the 2001 and 2002 economic crisis, electric power demand experienced significant growth, increasing at an estimated average of approximately 3.86% per annum from 2002 through 2015 (despite a decline in 2009), due to its reduced cost as a result of certain energy subsidies, freezing of margins and elimination of inflation adjustment provisions in distribution concessions. In March 2016, the Argentine government unified and increased wholesale energy prices for all consumption in Argentina, eliminated certain energy subsidies and implemented an incentive plan (through discounts) for residential customers whose electric power consumption is at least 10.00% lower than their consumption for the same month of the previous year. These measures are currently in an early stage of implementation, and we cannot ascertain as of the date of this annual report what the effect on our revenues could be. Any significant increase in energy prices to consumers (whether through a tariff increase or through a cut in consumer subsidies) could result in a decline in demand for the energy that we generate. Any material adverse effect on electric power demand, in turn, could lead electric power generation companies, like us, to record lower revenues and results of operations than currently anticipated.
 
Argentina has certain energy transmission and distribution limitations that adversely affect the capacity of electric power generators to deliver all of the energy they are able to produce, which results in reduced sales
 
The energy that generators are able to deliver to the transmission system for the further delivery to the distribution system at all times depends on the capacity of the transmission and distribution systems that connects them to it. The transmission and distribution system are currently operating at near full capacity and both transmission and distributors may not be able to guarantee an increased supply of electric power to their customers. In the past years, the increase in demand for electric power resulted in blackouts in Buenos Aires and other cities around Argentina, which results in excess capacity for generators. As a result, the amount of hydroelectric energy and thermal energy generated is larger than what the transmission and distribution systems are capable of transmitting or distributing. Any transmission or distribution limitation for generators could reduce the energy sold, which could adversely affect our financial condition.
 
Our equipment, facilities and operations are subject to environmental, health and safety regulations
 
Our generation business is subject to federal and provincial laws, as well as to the supervision of governmental agencies and regulatory authorities in charge of enforcing environmental laws and policies. We operate in compliance with applicable laws and in accordance with directives issued by the relevant authorities and CAMMESA; however, it is possible that we could be subject to controls, which could result in penalties to be imposed on us, such as the termination of the HPDA Concession Agreement. In addition, future environmental regulations could require us to make investments in order to comply with the requirements set by the authorities, instead of making other scheduled investments and, as a result, could have a material adverse effect on our financial condition and our results of operations.
 
We operate in a heavily regulated sector that imposes significant costs on our business, and we could be subject to fines and liabilities that could have a material adverse effect on our results of operations
 
We are subject to a wide range of federal, provincial and municipal regulations and supervision, including laws and regulations pertaining to tariffs, labor, social security, public health, consumer protection, the environment and competition. Furthermore, Argentina has 23 provinces and one autonomous city (the City of Buenos Aires), each of which, under the Argentine National Constitution, has power to enact legislation concerning taxes, environmental matters and the use of public space. Within each province, municipal governments can also have powers to regulate such matters. Although the generation of electric power is considered an activity of general interest (actividad de interés general) subject to federal legislation, due to the fact that our facilities are located throughout various provinces, we are also subject to provincial and municipal legislation. Future developments in the provinces and municipalities concerning taxes (including sales, security and health and general services taxes), environmental matters, the use of public space or other matters could have a material adverse effect on our business, results of operations and financial condition. Compliance with existing or future legislation and regulations could require us to make material expenditures and divert funds away from planned investments in a manner that could have a material adverse effect on our business, results of operations and financial condition.
 
In addition, our failure to comply with existing regulations and legislation, or reinterpretations of existing regulations and new legislation or regulations, such as those relating to fuel and other storage facilities, volatile materials, cyber security, emissions or air quality, hazardous and solid waste transportation and disposal and other environmental matters, or changes in the nature of the energy regulatory process may subject us to fines and penalties and have a significant adverse impact on our financial results.
 
 
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A cyberattack could adversely affect our business, balance sheet, results of operations and cash flow
 
We depend on the efficient and uninterrupted operation of our inter-plant communication systems, for which we have all our links redundant, providing greater security and minimizing the risks of outage. Additionally, we have redundant links with CAMMESA. Temporary or long-lasting failures of our inter-plant communication systems, including their links redundant, could have a material adverse effect on our operations. In general, information security risks have increased in recent years as a result of the proliferation of new and more sophisticated technologies and also due to cyberattack activities. As part of our development and initiatives, more equipment and systems have been connected to the Internet. We also rely on digital technology including information systems to process financial and operational information. Due to the critical nature of our infrastructure and our business and the increased accessibility allowed through the Internet connection, we could face an increased risk of cyberattacks such as computer break-ins, phishing, identity theft and other disruptions that could negatively affect the security of information stored in and transmitted through our computer systems and network infrastructure. In the event of a cyberattack, we could experience an interruption of our commercial operations, material damage and loss of customer information; a substantial loss of income, suffering response costs and other economic losses; and it could subject us to more regulation and litigation and damage to our reputation. Although we intend to continue to implement security technology devices and establish operational procedures to prevent disruption resulting from, and counteract the negative effects of cybersecurity incidents, it is possible that not all of our current and future systems are or will be entirely free from vulnerability and these security measures will not be successful. Accordingly, cybersecurity is a material risk for us and a cyber-attack could adversely affect our business, results of operations and financial condition.
 
Our power plants are subject to the risk of mechanical or electrical failures and any resulting unavailability may affect our ability to fulfill our contractual and other commitments and thus adversely affect our business and financial performance
 
Our power generation units are at risk of mechanical or electrical failure and may experience periods of unavailability affecting our ability to generate electric power. For example, certain of our turbogenerators at the Puerto Complex, including generators 5, 6, 7 and 8, began operating in the 1960s and are, therefore, over 50 years old. Because of their age, these generators may face a higher risk of mechanical or electrical failure. Our combined cycle plant located in the Puerto Complex has suffered major failures in the past, for example in the rotor of one of the gas turbines and in the generator. Any unplanned unavailability of our generation facilities may adversely affect our financial condition or results of operations.
 
Risks arise for our business from technological change in the energy market
 
The energy market is subject to far-reaching technological change, both on the generation side and on the demand side. For example, with respect to energy generation, the development of energy storage devices (battery storage in the megawatt range) or facilities for the temporary storage of power through conversion to gas (so-called power-to-gas-technology), the increase in energy supply due to new technological applications such as fracking or the digitalization of generation and distribution networks should be mentioned.
 
New technologies to increase energy efficiency and improve heat insulation, for the direct generation of power at the consumer level, or that improve refeeding (for example, by using power storage for renewable generation) may, on the demand side, lead to structural market changes in favor of energy sources with low or zero carbon dioxide emissions or in favor of decentralized power generation, (for instance, via small-scale power plants within or close to residential areas or industrial facilities.)
 
If our business is unable to react to changes caused by new technological developments and the associated changes in market structure, our equity, financial or other position, or our results, operation and business, could be materially and adversely affected.
 
We may face competition
 
The power generation markets in which we operate are characterized by numerous strong and capable participants, many of which may have extensive and diversified developmental or operating experience (including both domestic and international) and financial resources similar to or significantly greater than ours. See “Item 4.B. Business OverviewCompetition. An increase in competition could cause reductions in prices and increase acquisition prices for fuel, raw materials and existing assets and, therefore, adversely affect our results of operations and financial condition.
 
We compete with other generation companies for the megawatt of capacity that are allocated through public auction processes. On October 7, 2016, the Ministry of Energy finalized the auction process for the installation of new renewable energy units and granted awards in the amount of 1,108.65 MW, including one biomass project, 12 wind energy projects and four solar energy projects. Of these, we were awarded one wind energy project for 99 MW of generating capacity at the price of US$61.50 per MWh. On October 31, 2016, the Ministry of Energy and Mining, pursuant to Resolution No. 252/16, launched Round 1.5 of the RenovAR Program as a continuation of Round 1 and on November 25, 2016, granted awards in the amount of 1281.5 MW, including 10 wind energy projects and 20 solar energy projects. Of these, we were awarded one wind energy project for 48 MW of generating capacity at the price of US$59.38 per MWh. Following Rounds 1 and 1.5 of the RenovAR Program, the Ministry of Energy and Mining pursuant to Resolution No. 275/17, which launched Round 2 of the program on August 17, 2017, granted awards in the amount of 2,043 MW of renewable power capacity. We submitted bids for Round 2 of the RenovAR Program on October 19, 2017 and, on November 29, 2017, we were awarded a wind energy project called, La Genoveva I, which will allow us to add an additional capacity of 86.6 MW to our portfolio and to continue to build a presence in the renewable energies sector.
 
 
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The Secretariat of Electric Energy, pursuant to Resolution SEE No. 287-E/17, called for proposals for supply of electric power to be generated through existing units, the conversion of open combined cycle units into closed combined cycle units or the installation of co-generation units. We submitted bids on August 9, 2017, and, on September 25, 2017, we were awarded the two co-generation projects. Our Terminal 6 San Lorenzo and Luján de Cuyo projects have the following two sources of income: (i) electric power and electric energy sales to CAMMESA through PPAs with a 15-year term which are priced in U.S. dollars and (ii) steam sales pursuant to separate steam supply agreements with T6 Industrial S.A. and YPF, respectively, which are priced in U.S. dollars.
 
In addition, we have acquired four heavy-duty, highly efficient gas turbines and 130 hectares of land in the north of the Province of Buenos Aires. We expect that these assets will potentially allow us to develop new power capacity. For example, we are currently installing one of the Siemens gas turbines, with a capacity of 286 MW, for the Terminal 6 San Lorenzo co-generation project described above. Our objective is to develop new generating capacity, through one or more projects, using the remaining three units and the aforementioned land, in which we have already invested US$134 million, to install new generation capacity, through one or more potential future projects. This could add 969 MW to our installed capacity through one or more projects under a simple cycle configuration. Because of the competition among generation companies in these auction processes, we cannot predict whether we will be awarded the projects and whether we will be able to utilize these assets as intended. In addition, as of the date of this annual report, we have already paid SEK$381.37 million (which, converted at the exchange rate quoted by the Central Bank as of the date of each payment, equals US$45.46 million) to purchase two additional Siemens gas turbines for our Luján de Cuyo project.
 
We and our competitors are connected to the same electrical grid that has limited capacity for transportation, which, under certain circumstances, may reach its capacity limits. Therefore, new generators may connect, or existing generators may increase, their outputs and dispatch more electric power to the same grid that would prevent us from delivering our energy to our customers. In addition, the Argentine government (or any other entity on its behalf) might not make the necessary investments to increase the systems capacity, which, in case there is an increase of energy output, would allow us and existing and new generators to efficiently dispatch our energy to the grid and to our customers. As a result, an increase in competition could affect our ability to deliver our product to our customers, which would adversely affect our business, results of operations and financial condition.
 
Our business is subject to risks arising from natural disasters, catastrophic accidents and terrorist attacks
 
Our generation facilities, or the third-party fuel transportation or electric power transmission infrastructure that we rely on, may be damaged by flooding, fires, earthquakes and other catastrophic disasters arising from natural or accidental or intentional human causes. We could experience severe business disruptions, significant decreases in revenues based on lower demand arising from catastrophic events, or significant additional costs to us not otherwise covered by business interruption insurance clauses. There may be an important time lag between a major accident, catastrophic event or terrorist attack and our definitive recovery from our insurance policies, which typically carry non-recoverable deductible amounts, and in any event are subject to caps per event. In addition, any of these events could cause adverse effects on the energy demand of some of our customers and of consumers generally in the affected market. Some of these considerations, could have a material adverse effect on our business, financial condition and our result of operations.
 
We may be subject to expropriation or similar risks
 
All or substantially all of our assets are located in Argentina. We are engaged in the business of power generation and, as such, our business or our assets may be considered by the government to be a public service or essential for the provision of a public service. Therefore, our business is subject to political uncertainties, including expropriation or nationalization of our business or assets, loss of concessions, renegotiation or annulment of existing contracts, and other similar risks. For example, the HPDA Concession Agreement pursuant to which we are permitted to operate our Piedra del Águila plant expires on December 29, 2023.
 
In such an event, we may be entitled to receive compensation for the transfer of our assets. However, the price received may not be sufficient, and we may need to take legal actions to claim appropriate compensation. Our business, financial condition and results of our operations could be adversely affected by the occurrence of any these events.
 
 
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Changes in regulatory frameworks under which we sell our electricity may affect our financial condition and results of operations
 
We currently sell our capacity availability and electricity under various regulatory frameworks, including the Energía Base and Energía Plus. See “Item 4.B. Business OverviewOur Customers and “Item 4.B. Business OverviewThe Argentine Electric Power Sector.
 
On December 16, 2016, the Argentine government declared a state of emergency with respect to the national electrical system until December 31, 2017. We cannot assure you what further changes the Argentine government may make to the Energía Base or the other regulatory frameworks under which we sell power availability or electricity, including whether these changes future changes will not negatively impact our results of operations. Moreover, we cannot assure you under what regulatory framework we will be able to sell our generation capacity and electricity in the future.
 
On March 1, 2019, by means of Resolution SRRyME No. 1/19, the Argentine Government reduced prices for power capacity and energy under Energía Base, which had been previously increased by Resolution SEE No. 19/17. This change was defined as a transition measure by the recitals of Resolution SRRyME No. 1/19. However, we cannot assure you that further reductions of these tariffs will not occur. Moreover, although under Resolution SRRyME No. 1/19 power capacity and energy tariffs are set in U.S. dollars, we cannot assure you that Energía Base prices in the future will remain denominated in this currency.
 
We cannot assure you that changes in the current applicable laws and regulations, or adverse judicial or administrative interpretations of such laws and regulations, will not adversely affect our results of operations. In addition, some of the measures proposed by the new government may also generate political and social opposition, which may in turn prevent the new government from adopting such measures as proposed.
 
Risks Relating to Our Business
 
Our results depend largely on the compensation established by the Secretariat of Electric Energy and received from CAMMESA
 
Since the enactment of Resolution SE No. 95/13, issued by the former Secretariat of Electric Energy, as amended, our compensation has depended largely on the variable compensation determined by energy output and availability. This resolution was replaced in February 2017 by Resolution SEE No. 19/17, issued by Secretariat of Electric Energy, which in turn was replaced by Resolution No. 1/19 of the Secretary of Renewable Resources and Electric Markey of the National Ministry of Economy (the “Resolution SRRyME No. 1/19”). Except for sales under contracts, revenues from energy production are calculated and paid by CAMMESA pursuant to a fixed and variable costs system arising from the Resolution SRRyME No. 1/19, which also establishes that CAMMESA will convert prices nominated in US$ into ARS applying the exchange rate informed by the Argentine Central Bank in accordance with its Communication “A” 3500, of the day prior to the expiry date of the economic transaction. See Item 5.A. Operating ResultsFactors Affecting Our Results of OperationsOur RevenuesThe Energía Base and “Item 3.D. Risk FactorsRisks Relating to the Electric Power Sector in ArgentinaWe have, in the recent past, been unable to collect payments, or to collect them in a timely manner, from CAMMESA and other customers in the electric power sector. The tariffs under the Energía Base had been increased in February, May and November 2017 pursuant to Resolution SEE No. 19/17, and since March 1, 2019, pursuant to Resolution SRRyME No. 1/19, the prices for power capacity and energy under Energía Base have been decreased. This change was defined as a transition measure by the recitals of Resolution SRRyME No. 1/19. However, we cannot assure you that further reductions of these tariffs will not occur. Moreover, although under Resolution SRRyME No. 1/19 power capacity and energy tariffs are set in U.S. dollars, we cannot assure you that Energía Base prices in the future will remain denominated in this currency.
 
As a result of this system, our revenues are highly dependent on actions taken by regulatory authorities. Additionally, there are several bills submitted to the National Congress by legislators of the opposition which establish that until December 21, 2019, tariffs applied by electricity Distributors, must not be increased, and, in the case of some of those bills, that also tariffs must return to the values in force on December 31, 2018 or January 1, 2017, depending on the bill. In the event that these projects prosper and become a law, the current compensation system could be changed. Any change in the current system could have a material adverse effect on our revenues and, as a result, our results of operations.
 
Factors beyond our control may affect our ability to win public bids for new generation capacity, or affect or delay the completion of new power plants once we have been awarded projects
 
Our business plan contemplates an investment in new energy generation projects in order to expand our generating capacity by more than 659 MW. This includes more than 235.95 MW from renewable sources, including wind and solar energy projects, as well as the installation of new thermal generation units with an installed generating capacity of 423 MW.
 
 
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Following Rounds 1 and 1.5 of the RenovAR Program, the Ministry of Energy and Mining pursuant to Resolution No. 275/17, which launched Round 2 of the program on August 17, 2017 and granted awards in the amount of 2,043 MW of renewable power capacity. We submitted bids for Round 2 of the RenovAR Program on October 19, 2017 and, on November 29, 2017, we were awarded a wind energy project called, La Genoveva I, which will allow us to add an additional capacity of 86.6 MW to our portfolio and to continue to build a presence in the renewable energies sector.
 
The Secretariat of Electric Energy, pursuant to Resolution SEE No. 287-E/17, called for proposals for supply of electric power to be generated through existing units, the conversion of open combined cycle units into closed combined cycle units or the installation of co-generation units. We submitted bids on August 9, 2017, and, on September 25, 2017, we were awarded the two co-generation projects with the characteristics set forth in the table below. The Terminal 6 San Lorenzo and Luján de Cuyo projects have the following two sources of income: (i) electric power sales to CAMMESA through PPAs with a 15-year term which are priced in U.S. dollars; and (ii) steam sales pursuant to separate steam supply agreements with T6 Industrial S.A. and YPF, respectively, which are priced in U.S. dollars.
 
In addition, we have acquired four heavy-duty, highly efficient gas turbines and 130 hectares of land in the north of the Province of Buenos Aires. We expect that these assets will potentially allow us to develop new power capacity. For example, we are currently installing one of the Siemens gas turbines, with a capacity of 286 MW, for the Terminal 6 San Lorenzo co-generation project described above. Our objective is to develop new generating capacity, through one or more projects, using the remaining three units and the aforementioned land, in which we have already invested US$134 million, to install new generation capacity, through one or more potential future projects. This could add 969 MW to our installed capacity through one or more projects under a simple cycle configuration. Because of the competition among generation companies in these auction processes, we cannot predict whether we will be awarded the projects and whether we will be able to utilize these assets as intended. In addition, as of the date of this annual report, we have already paid SEK$381.37 million (which, converted at the exchange rate quoted by the Central Bank as of the date of each payment, equals US$45.46 million) to purchase two additional Siemens gas turbines for our Luján de Cuyo project.
 
Delays in construction or commencement of operations of expanded capacity in our existing power plants or our new power plants could lead to an increase in our financial needs and also cause our financial returns on new investments to be lower than expected, which could materially adversely affect our financial condition and results of operations.
 
Factors that may impact our ability to commence operations at our existing power plants or build new power plants include: (i) the failure of contractors to complete or commission the facilities or auxiliary facilities by the agreed-upon date or within budget; (ii) the unexpected delays of third parties such as gas or electric power distributors in providing or agreeing to project milestones in the construction or development of necessary infrastructure linked to our generation business; (iii) the delays or failure by our turbine suppliers in providing fully operational turbines in a timely manner; (iv) difficulty or delays in obtaining the necessary financing in terms satisfactory to us or at all; (v) delays in obtaining regulatory approvals, including environmental permits; (vi) court rulings against governmental approvals already granted, such as environmental permits; (vii) shortages or increases in the price of equipment reflected through change orders, materials or labor; (viii) opposition by local and/or international political, environmental and ethnic groups; (ix) strikes; (x) adverse changes in the political and regulatory environment in Argentina; (xi) unforeseen engineering, environmental and geological problems; and (xii) adverse weather conditions, natural disasters, accidents or other unforeseen events. Any cost overruns could be material. In addition, any of these other factors may cause delays in the completion of expanded capacity at our existing power plants or the construction of our new power plant, which could have a material adverse effect on our business, financial condition and results of operations. These delays may also result in short-term sanctions by CAMMESA and, in extreme cases, sanctions for the duration of the contract.
 
Our business may require substantial capital expenditures for ongoing maintenance requirements and the expansion of our installed generation capacity
 
Incremental capital expenditures may be required to fund ongoing maintenance necessary to maintain our power generation and operating performance and improve the capabilities of our electric power generation facilities. Furthermore, capital expenditures will be required to finance the cost of our current and future expansion of our generation capacity. If we are unable to finance any such capital expenditures in terms satisfactory to us or at all, our business and the results of our operations and financial condition could be adversely affected. Our financing ability may be limited by market restrictions on financing availability for Argentine companies. See “—Risk Relating to Argentina A lack of financing for Argentine companies due to the unresolved litigation with holdout bondholders, may negatively impact our financial condition or cash flows and Item 4.B. Business Overview.
 
 
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The non-renewal or early termination of the HPDA Concession Agreement would adversely affect our results of operations
 
The HPDA Concession Agreement executed between us and the Argentine government, pursuant to which we are permitted to operate our Piedra del Águila plant, expires on December 29, 2023. This plant has a total installed capacity of 1,440 MW, and it represented approximately 29.07% of our generation from continuing operations and 29.07% of our total generation, and 16.66% of our revenues from continuing operations in 2018 and 16.66% of our total revenues in 2018. We currently intend to renew the HPDA Concession Agreement prior to its expiration. If the HPDA Concession Agreement expires without renewal, we will be required to revert the assets to the Argentine government. The HPDA Concession Agreement also contains various requirements related to the operation of the hydroelectric plant and compliance with laws and regulations. The non-performance of the HPDA Concession Agreement could give rise to certain penalties and even the termination of the concession. If the concession were terminated, it would be granted to a new company organized by the Argentine government and a tender offer would be carried out for selling the new companys shares of stock. The proceeds to be received by us in such tender offer would be calculated based on a formula in which the proceeds of the tender decrease as the expiration of the concession term comes closer. Any non-renewal or early termination of the HPDA Concession Agreement would materially and adversely affect our financial condition and results of operation.
 
Our interests in TJSM, TMB and CVOSA will be significantly diluted
 
As of the date of this annual report, we have a 30.8752% interest in TJSM and a 30.9464% interest in TMB, both companies that are engaged in managing the purchase of equipment, building, operating and maintaining power plants constructed under the FONINVEMEM program. We have the right to name two out of nine directors on the board of directors of each company. As of the date of this annual report, we also own 56.19% of CVOSA, the company that operates the thermal power plant in Timbues. After ten years of operations of each company (which will occur on February 2, 2020 for TJSM, January 7, 2020 for TMB and March 20, 2028 for CVOSA), each company is entitled to receive property rights to such power plants from the respective trusts currently holding such power plants. At such time, since the Argentine government financed part of the construction, it will be incorporated as a shareholder of TJSM, TMB and CVOSA, and our interests in TJSM, TMB and CVOSA will be significantly diluted. In the case of TJSM and TMB, we cannot estimate the exact effects of such potential dilution due to the fact that the Argentine governments stake in these companies depends on the funds provided by the Argentine government for the construction of each plant, which has not yet been defined. In the case of CVOSA, although the effect of the potential dilution has also not yet been defined for the same reasons, the Argentine governments stake in CVOSA will be at least 70% pursuant to FONINVEMEM arrangements for CVOSA. Any dilution of our interest in TJSM, TMB or CVOSA could reduce our income, which could adversely affect our results of operations. See “Item 4.B. Business OverviewFONINVEMEM and Similar Programs.
 
Future changes in the rainfall amounts in the Limay River basin could adversely affect the revenues from the Piedra del Águila concession and, therefore, our financial results
 
As a hydroelectric facility, Piedra del Águila depends on the availability of water resources in the Limay River basin for electric power generating purposes, which in turn depends on the rainfall amounts in the area. In 1996, 2007 and 2012, and in particular in 1998, 1999 and 2016, the area experienced record-low rainfall levels. Lack of water resulted in lower electric power generation and, therefore, lower revenue. However, rainfall levels, and therefore electric generation, were significantly higher than average during 1995, 2001, 2002, 2005 and 2006. For more information about Piedra del Águilas seasonality, see “Item 4.B. Business OverviewSeasonality.
 
In the event of critically low water levels, the Intergovernmental Basin Authority, which is in charge of managing the basin of the Limay, Neuquén and Negro rivers, is entitled to manage the water flows according to its flow control standards, which could result in lower water resources for us, which in turn, would result in decreased generation activities. Further, under the HPDA Concession Agreement, we are not entitled to receive any compensation for revenue losses as a result of such actions.
 
The Limay River basins flow may not be sufficient to maintain a regular generation level at Piedra del Águila and the enforcement authority may implement unfavorable measures for Piedra del Águila, and therefore, for us, which could adversely affect our financial condition and our results of operations.
 
Our ability to operate wind farms profitably is highly dependent on suitable wind and associated weather conditions
 
The amount of energy generated by, and the profitability of, wind farms are highly dependent on climate conditions, particularly wind conditions, which can vary materially across locations, seasons and years. Variations in wind conditions at wind farm sites occur as a result of daily, monthly and seasonal fluctuations in wind currents and, over the longer term, as a result of more general climate changes and shifts. Because turbines will only operate when wind speeds fall within certain specific ranges that vary by turbine type and manufacturer, if wind speeds fall outside or towards the lower end of these ranges, energy output at our wind farms would decline.
 
 
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If in the future the wind resource in the areas where our wind farms are located is lower than expected, electricity production at such wind farms would be lower than expected and consequently could materially adversely affect our results of operations.
 
Our insurance policies may not fully cover damage, and we may not be able to obtain insurance against certain risks
 
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 may not have sufficient insurance to cover any particular risk or loss. If an accident or other event occurs that is not covered by our current insurance policies, such as cybersecurity risk, we may experience material losses or have to disburse significant amounts from our own funds, all of which could have a material adverse effect on our operations and financial position. In addition, an insufficiency in our insurance policies could have an adverse effect on us. In such case, our financial condition and our results of operations could be adversely affected. See “Item 4.B. Business OverviewInsurance.
 
Our generation operations require us to handle hazardous elements such as fuels, which could potentially result in damage to our facilities or injuries to our personnel
 
Although we comply with all applicable environmental safety laws and best practices, any accident involving the fuels with which we operate could have adverse environmental consequences and could damage our industrial facilities or our personnel.
 
Any structural damage to the dam or any other structure located in any of our hydroelectric plants could compromise its electric power generating capacity. Any generation constraints resulting from structural damage could have a material adverse effect on our financial condition and results of operations.
 
We may be exposed to lawsuits and or administrative proceedings that could adversely affect our financial condition and results of operations
 
In the ordinary course of our business we enter into agreements with CAMMESA and other parties. Litigation and/or regulatory proceedings are inherently unpredictable, and excessive verdicts do occur. Adverse outcomes in lawsuits and investigations could result in significant monetary damages, including indemnification payments, or injunctive relief that could adversely affect our ability to conduct our business and may have a material adverse effect on our financial condition and results of operations.
 
Energy demand is seasonal, largely due to climate conditions
 
Energy demand fluctuates according to the season and climate conditions may materially and adversely impact energy demand. During the summer (December through March), energy demand may increase significantly due to the need for air conditioning and, during winter (June through August), energy demand may fluctuate according to the needs for lighting and heating. As a result, seasonal changes could materially and adversely affect the demand for energy and, consequently, affect our results of operations and financial condition (in particular sales derived from the Energía Plus regulatory framework, which is dependent on demand rather than on capacity committed under contract).
 
We may undertake acquisitions and investments to expand or complement our operations that could result in operating difficulties or otherwise adversely affect our financial conditions and results of operations
 
In order to expand our business, from time to time, we may carry out acquisitions and investments which offer added value and are consistent with or complementary to our business strategy.
 
For example, in 2015, we acquired: (i) a direct and indirect interest of 24.99% in DGCUs stock capital; and (ii) a direct and indirect interest of 44.10% of DGCEs stock capital, both of which operate in a highly regulated industry. The results of these companies operations are influenced by the applicable regulatory framework and the interpretation and enforcement of such regulatory framework by ENARGAS, the governmental authority created to regulate privatized natural gas transmission and distribution companies. Their licenses are subject to revocation under certain circumstances. If any of these events were to occur, it could have a material adverse effect on them and, as a result, on us. In connection with potential acquisition and investment transactions, we may be exposed to various risks, including those arising from: (i) not having accurately assessed the value, future growth potential, strengths, weaknesses and potential profitability of potential acquisition targets; (ii) difficulties in successfully integrating, operating, maintaining or managing newly-acquired operations, including personnel; (iii) unexpected costs of such transactions; (iv) difficulties in obtaining the necessary financing and successfully reaching any required financial closing; or (v) unexpected contingent or other liabilities or claims that may arise from such transactions. If any of these risks were to materialize, it could adversely affect our financial condition and results of operations.
 
 
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If we were to acquire another energy company in the future, such acquisition could be subject to the Argentine Antitrust Authority’s approval
 
The Antitrust Law provides that any transactions involving the acquisition, transfer or control of another companys assets will be subject to the Comisión Nacional de Defensa de la Competencia (CNDC) (Argentine Antitrust Authority) prior consent and approval in the event that (i) the total revenues of the companies involved for the last fiscal year exceeds the sum of Ps.200 million in Argentina; and (ii) the transaction amount or the value of the transferred assets located in Argentina exceeds Ps.20 million.
 
The Argentine Antitrust Authority will determine whether any acquisition subject to its prior approval negatively impacts competitive conditions in the markets in which we compete or adversely affects consumers in these markets. Although we are not contemplating any business combination as of the date of this annual report, if the Argentine Antitrust Authority were to reject any business combination or if such authority were to take any action to impose conditions or performance commitments on us as part of the approval process for any business combination, it could adversely affect our financial condition and results of operations and prevent us from achieving the anticipated benefits of such acquisition.
 
We depend on senior management and other key personnel for our current and future performance
 
Our current and future performance depends to a significant degree on our qualified senior management team, and on our ability to attract and retain qualified management. Our future operations could be harmed if any of our senior executives or other key personnel ceased working for us. Competition for senior management personnel is intense, and we may not be able to retain our personnel or attract additional qualified personnel. The loss of a member of senior management may require the remaining executive officers to divert immediate and substantial attention to fulfilling his or her duties and of seeking a replacement. Any inability to fill vacancies in our senior executive positions on a timely basis could harm our ability to implement our business strategy, which would harm our business and results of operations.
 
We could be affected by material actions taken by the trade unions
 
Although we have stable relationships with our work force, in the past we experienced organized work stoppages and strikes, and we may face such work stoppages or strikes in the future. Labor claims are common in the Argentina energy sector, and in the past, unionized employees have blocked access and caused damages to the facilities of various companies in the industry. Moreover, we have no insurance coverage for business interruptions caused by workers actions, which could have an adverse effect on our results of operations.
 
We are subject to anticorruption, anti-bribery, anti-money laundering and other laws and regulations
 
We are subject to anti-corruption, anti-bribery, anti-money laundering and other laws and regulations. We may be subject to investigations and proceedings by authorities for alleged infringements of these laws. Although we perform compliance processes and maintain internal control systems, these proceedings may result in fines or other liabilities and could have a material adverse effect on our reputation, business, financial conditions and result of operations. If any such subsidiaries, employees or other persons engage in fraudulent, corrupt or other unfair business practices or otherwise violate applicable laws, regulations or internal controls, we could become subject to one or more enforcement actions or otherwise be found to be in violation of such laws, which may result in penalties, fines and sanctions and in turn adversely affect our reputation, business, financial condition and result of operations.
 
Our ability to generate electricity at our thermal generation plants partially depends on the availability of natural gas and, to a lesser extent, liquid fuel.
 
The supply and price of natural gas and liquid fuel used in our thermal generation plants has been in the past, and may in the future be, affected by, among other things, the availability of natural gas and liquid fuel in Argentina, given the current shortage of natural gas supply and declining reserves in Argentina. In particular, many oil and gas fields in Argentina are mature and in recent years have not been subject to significant investment into development and exploration activities and, therefore, reserves are likely to be depleted.
 
Pursuant to Resolution No. 95/2013, as amended, CAMMESA is in charge of managing and supplying all fuels required to run our thermal plants. If in the future we were to become required to purchase our own natural gas or liquid fuel from third parties, we cannot assure you that we will be able to purchase natural gas or liquid fuel at prices that are fully reimbursable by CAMMESA and, even if CAMMESA accepted to reimburse us for such amounts, it may be uncertain when such reimbursements would occur. In addition, natural gas delivery depends on the infrastructure (including barge facilities, roadways and natural gas pipelines) available to serve each generation facility. As a result, our thermal plants are subject to the risks of disruptions or curtailments in the fuel delivery chain and infrastructure. Any such disruption or curtailment may result in the unavailability, or higher prices, of natural gas or liquid fuel. Moreover, if in the future we are required to purchase our own natural gas or liquid fuel from third parties at prices that are not fully reimbursable by CAMMESA, such situation may have a material adverse effect on our financial condition and results of operations.
 
 
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We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined
 
As of December 31, 2018, we had trade receivables under the CVO Agreement for US$548 million (including VAT), plus accrued interests after the CVO Commercial Approval which were indexed to the London Interbank Offered Rate (“LIBOR”). In an announcement on 27 July 2017, the U.K. Financial Conduct Authority (FCA), which is the competent authority for the regulation of benchmarks in the UK, advocated a transition away from reliance on LIBOR to alternative reference rates and stated that it would no longer persuade or compel banks to submit rates for the calculation of the LIBOR rates after 2021 (the “FCA Announcement”). The FCA Announcement formed part of ongoing global efforts to reform LIBOR and other major interest rate benchmarks. At this time, the nature and overall timeframe of the transition away from LIBOR is uncertain and no consensus exists as to what rate or rates may become accepted alternatives to LIBOR. It is not possible to predict the further effect of the rules of the FCA, any changes in the methods by which LIBOR is determined, or any other reforms to LIBOR that may be enacted in the United Kingdom, the European Union or elsewhere. Any such developments may cause LIBOR to perform differently than in the past, or cease to exist. In addition, any other legal or regulatory changes made by the FCA, ICE Benchmark Administration Limited, the European Money Markets Institute (formerly Euribor-EBF), the European Commission or any other successor governance or oversight body, or future changes adopted by such body, in the method by which LIBOR is determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage market participants from continuing to administer or to participate in LIBOR’s determination, and, in certain situations, could result in LIBOR no longer being determined and published. If a published U.S. Dollar LIBOR rate is unavailable after 2021, the interest rates on our debt which is indexed to LIBOR will be determined using various alternative methods, any of which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S. Dollar LIBOR was available in its current form. Further, the same costs and risks that may lead to the discontinuation or unavailability of U.S. Dollar LIBOR may make one or more of the alternative methods impossible or impracticable to determine. Any of these proposals or consequences could have a material adverse effect on our financing costs or in the valuation of the trade receivables under the CVO Agreement.
 
Risks Relating to our Shares and ADSs
 
It may be difficult for you to obtain or enforce judgments against us
 
We are incorporated in Argentina. All of our directors and executive officers reside outside the United States, and substantially all of our and their assets are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon these persons or to enforce judgments against them or us in U.S. courts. We have been advised by our special Argentine counsel, Bruchou, Fernández Madero & Lombardi, that there is doubt as to the enforceability in original actions in Argentine courts of liabilities predicated solely on U.S. federal securities laws and as to the enforceability in Argentine courts of judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of U.S. federal securities laws. The enforcement of such judgments will be subject to compliance with certain requirements under Argentine law, such as Articles 517 through 519 of the Argentine Code of Civil and Commercial Procedure, including the condition that such judgments do not violate the principles of public policy of Argentine Law, as determined by an Argentine court. In addition, an Argentine court will not order an attachment on property located in Argentina and determined by such court to be essential for the provision of a public service.
 
Future exchange controls and restrictions on the repatriation of capital from Argentina may impair the ability of holders of ADSs to receive dividends and distributions on, and the proceeds of any sale of, the shares underlying the ADSs, which could affect the market value of the ADSs
 
In 2001 and 2002 Argentina imposed exchange controls and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments abroad, including payments of dividends. In addition, new regulations were issued in the last quarter of 2011, which significantly curtailed access to the MULC by individuals and private sector entities. More recently, since December 2015 the new Argentine administration has lifted many of the foreign exchange restrictions imposed in 2011, including the lifting of certain restrictions for the repatriation of portfolio investment by non-resident investors. As a consequence, with respect to the proceeds of any sale of common shares underlying the ADSs, as of the date of this annual report, the conversion from pesos into U.S. dollars and the remittance of such U.S. dollars abroad is not subject to prior approval of the Argentine Central Bank, provided that the foreign beneficiary is either a natural or legal person residing in or incorporated and established in jurisdictions, territories or associated states that are considered cooperators for the purposes of fiscal transparency.
 
 
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Argentina may impose new stricter exchange controls and transfer restrictions in the future, among other things, in response to capital flight or a significant depreciation of the peso. In such a case, the ADS Depositary may be prevented from converting pesos it receives in Argentina for the account of the ADS holders. If this conversion is not possible, the deposit agreement allows the ADS Depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. If the exchange rate fluctuates significantly during a time when the ADS Depositary cannot convert the foreign currency, holders of our ADSs may lose some or all of the value of the dividend distribution. Also, if payments cannot be made in U.S. dollars abroad, the repatriation of any funds collected by foreign investors in pesos in Argentina may be subject to restriction. In such event, the ability of our foreign shareholders and holders of ADSs to obtain the full value of their shares and ADSs and the market value of our shares and ADSs may be adversely affected.
 
We will be traded on more than one market and this may result in price variations; in addition, investors may not be able to easily move shares for trading between such markets
 
Our common shares are listed on the BYMA and, since February 2, 2018, our ADSs are listed on the NYSE. Any markets that may develop for our common shares or for the ADSs may not have liquidity and the price at which the common shares or the ADSs may be sold is uncertain.
 
Trading in the ADSs or our common shares on these markets takes place in different currencies (U.S. dollars on the NYSE and pesos on the BYMA), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Argentina). The trading prices of the securities on these two markets may differ due to these and other factors. Any decrease in the price of our common shares on the BYMA could cause a decrease in the trading price of the ADSs on the NYSE. Investors could seek to sell or buy our shares to take advantage of any price differences between the markets through a practice referred to as arbitrage. Any arbitrage activity could create unexpected volatility in both our share prices on one exchange, and the ADSs available for trading on the other exchange. In addition, holders of ADSs will not be immediately able to surrender their ADSs and withdraw the underlying common shares for trading on the other market without effecting necessary procedures with the ADS Depositary. This could result in time delays and additional cost for holders of ADSs.  
 
Under Argentine Corporate Law, shareholder rights may be fewer or less well defined than in other jurisdictions
 
Our corporate affairs are governed by our bylaws and by Argentine Law No. 19,550, as amended (the Argentine Corporate Law), which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States (such as Delaware or New York), or in other jurisdictions outside Argentina. Thus, the rights of holders of our ADSs or holders of our common shares under the Argentine Corporate Law to protect their interests relative to actions by our Board of Directors may be fewer and less well defined than under the laws of those other jurisdictions. Although insider trading and price manipulation are illegal under Argentine law, the Argentine securities markets may not be as highly regulated or supervised as the U.S. securities markets or markets in some of the other jurisdictions. In addition, rules and policies against self-dealing and regarding the preservation of shareholder interests may be less well defined and enforced in Argentina than in the United States, or other jurisdictions outside Argentina, putting holders of our common shares and the ADSs at a potential disadvantage.
 
Holders of our common shares and the ADSs located in the United States may not be able to exercise preemptive or accretion rights
 
Under the Argentine Corporate Law, if we issue new shares as part of a capital increase, our shareholders may have the right to subscribe to a proportional number of shares to maintain their existing ownership percentage. Rights to subscribe for shares in these circumstances are known as preemptive rights. In addition, shareholders are entitled to the right to subscribe for the unsubscribed shares remaining at the end of a preemptive rights offering on a pro rata basis, known as accretion rights. Upon the occurrence of any future increase in our capital stock, United States holders of common shares or ADSs will not be able to exercise the preemptive and related accretion rights for such common shares or ADSs unless a registration statement under the Securities Act is effective with respect to such common shares or ADSs or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to those common shares or ADSs. We may not file such a registration statement, or an exemption from registration may not be available. Unless those common shares or ADSs are registered or an exemption from registration applies, a U.S. holder of our common shares or ADSs may receive only the net proceeds from those preemptive rights and accretion rights if those rights can be sold by the ADS Depositary; if they cannot be sold, they will be allowed to lapse. Furthermore, the equity interest of holders of common shares or ADSs located in the United States may be diluted proportionately upon future capital increases.
 
 
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Voting rights, and other rights, with respect to the ADSs are limited by the terms of the deposit agreement
 
Holders may exercise voting rights with respect to the common shares underlying ADSs only in accordance with the provisions of the deposit agreement. There are no provisions under Argentine law or under our bylaws that limit ADS holders ability to exercise their voting rights through the ADS Depositary with respect to the underlying common shares, except if the ADS Depositary is a foreign entity and it is not registered with the IGJ. The ADS Depositary is registered with the IGJ. However, there are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with such holders. For example, Law No. 26,831 requires us to notify our shareholders by publications in certain official and private newspapers of at least 20 and no more than 45 days in advance of any shareholders meeting. ADS holders will not receive any notice of a shareholders meeting directly from us. In accordance with the deposit agreement, we will provide the notice to the ADS Depositary, which will in turn, if we so request, as soon as practicable thereafter provide to each ADS holder:
 
● 
the notice of such meeting;
 
● 
voting instruction forms; and
 
● 
a statement as to the manner in which instructions may be given by holders.
 
To exercise their voting rights, ADS holders must then provide instructions to the ADS Depositary how to vote the shares underlying ADSs. Because of the additional procedural step involving the ADS Depositary, the process for exercising voting rights will take longer for ADS holders than for holders of our common shares. Except as described in this annual report, holders of the ADS will not be able to exercise voting rights attaching to the ADSs.
 
Also, section 7.6 of the deposit agreement provides that each of the parties to the deposit agreement (including, without limitation, each holder and beneficial owner) waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding against us and/ or the ADS Depositary. This provision may have the effect of limiting and discouraging lawsuits against us and/ or the ADS Depositary. Moreover, you may not be able to exercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.
 
The relative volatility and illiquidity of the Argentine securities markets may substantially limit our ADS holders’ ability to sell common shares underlying the ADSs at the price and time they desire
 
Investing in securities that trade in developing countries, such as Argentina, often involves greater risk than investing in securities of issuers in the United States (see “Risks Relating to Argentina—Certain risks are inherent in any investment in a company operating in a developing country such as Argentina”). The Argentine securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States, and is not as highly regulated or supervised as some of these other markets. There is also significantly greater concentration in the Argentine securities market than in major securities markets in the United States. During December 2017, the ten largest Argentine companies in terms of their weight in the MERVAL index represented approximately 63.19% of its composition. Accordingly, although holders of our ADSs are entitled to withdraw the common shares underlying the ADSs from the ADS Depositary at any time, their ability to sell such shares at a price and time at which they wish to do so may be substantially limited. Furthermore, new capital controls imposed by the Central Bank could have the effect of further impairing the liquidity of the BYMA by making it unattractive for non-Argentines to buy shares in the secondary market in Argentina. See “Item 10.D.—Exchange Controls.
 
If there are substantial sales of our common shares or the ADSs, the price of the common shares or of the ADSs could decline
 
Sales of substantial number of our common shares or the ADSs could cause a decline in the market price of our common shares. In addition, if our significant shareholders, directors and members of senior management listed in “Item 6. Directors, Senior Management and Employees—Senior Officers, who, as of April 15, 2019, own in aggregate 35.55% of our outstanding common shares, sell our common shares or the ADSs or the market perceives that they intend to sell them, the market price of our common shares or the ADSs could drop significantly. Also, the Argentine government authorized the Ministry of Energy and Mining to promote the measures necessary to proceed with the sale, assignment or transfer of the equity interest owned by the Argentine government in power plants, including its interest in our Company (representing 8.25% of our outstanding shares). See “Item 4.B. Business Overview—The Argentine Electric Power Sector—General Overview of Legal Framework—Changes to the Electric Power Sector under the Macri Administration.
 
 
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Our shareholders may be subject to liability for certain votes of their securities
 
Our shareholders are not liable for our obligations. Instead, shareholders are generally liable only for the payment of the shares they subscribe. However, shareholders who have a conflict of interest with us and who do not abstain from voting may be held liable for damages to us, but only if the transaction would not have been approved without such shareholders votes. Furthermore, shareholders who willfully or negligently vote in favor of a resolution that is subsequently declared void by a court as contrary to Argentine Corporate Law or our bylaws may be held jointly and severally liable for damages to us or to other third parties, including other shareholders.
 
We are an “emerging growth company” and are availing ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make the ADSs or our common shares less attractive to investors
 
We are an EGC as defined in the U.S. Jumpstart Our Business Startups Act of 2012, and we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation.
 
We cannot predict if investors will find the ADSs or our common shares less attractive because we may rely on these exemptions. If some investors find the ADSs or our common shares less attractive as a result, there may be a less active trading market for the ADSs or our common shares and the price of the ADSs or our common shares may be more volatile. We may take advantage of these reporting exemptions until we are no longer an EGC.
 
We will cease to be an EGC upon the earliest of: (1) the last day of the fiscal year during which we have revenue of US$1.07 billion or more, (2) the last day of the fiscal year following the fifth anniversary of the date of this prospects, (3) the date on which we have issued more than US$1 billion in non-convertible debt during the previous three-year period or (4) when we become a large accelerated filer, as defined in Rule 12b-2 under the Exchange Act.
 
As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the Commission than a U.S. company. This may limit the information available to holders of our ADSs
 
We are a foreign private issuer, as defined in the SECs rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our officers and directors are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, while we expect to submit quarterly interim consolidated financial data to the Commission under cover of the Commissions Form 6-K, we are not required to file periodic reports and financial statements with the Commission as frequently or as promptly as U.S. public companies. Accordingly, there may be less information concerning our company publicly available than there is for U.S. public companies.
 
As a foreign private issuer, we are not subject to certain NYSE corporate governance rules applicable to U.S. listed companies
 
We rely on a provision in the NYSE Listed Company Manual that allows us to follow Argentine law with regard to certain aspects of corporate governance. This allows us to follow certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on the NYSE.
 
For example, we are exempt from NYSE regulations that require a listed U.S. company, among other things, to:
 
● 
have a majority of our board of directors be independent;
 
● 
establish a nominating and compensation composed entirely of independent directors;
 
● 
adopt and disclose a code of business conduct and ethics for directors, officers and employees; and
 
● 
have an executive session of solely independent directors each year.
 
The market price for our common shares or ADSs could be highly volatile
 
The market price for our common shares or the ADSs after the global offering is likely to fluctuate significantly from time to time in response to factors including:
 
 
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● 
fluctuations in our periodic operating results;
 
● 
changes in financial estimates, recommendations or projections by securities analysts;
 
● 
changes in conditions or trends in our industry;
 
● 
changes in the economic performance or market valuation of our competitors;
 
● 
announcements by our competitors of significant acquisitions, divestitures, strategic partnerships, joint ventures or capital commitments;
 
● 
events affecting equities markets in the countries in which we operate;
 
● 
legal or regulatory measures affecting our financial conditions;
 
● 
departures of management and key personnel; or
 
● 
potential litigation or the adverse resolution of pending litigation against us or our subsidiaries.
 
Volatility in the price of our common shares or the ADSs may be caused by factors outside of our control and may be unrelated or disproportionate to our operating results. In particular, announcements of potentially adverse developments, such as proposed regulatory changes, new government investigations or the commencement or threat of litigation against us, as well as announced changes in our business plans or those of competitors, could adversely affect the trading price of our common shares or the ADSs, regardless of the likely outcome of those developments or proceedings. Moreover, statements made about our Company, whether publicly or in private, may be misconstrued, particularly if read out of context. In a personal message in Spanish to an acquaintance in Argentina in December 2017, which was retransmitted without authorization, Mr. Pérès Moore, the former Chairman of our Board of Directors, stated in effect that Central Puerto is a valuable company, that its stock has risen substantially, and that whether there could be upside remains to be discussed. Mr. Pérès Moore did not intend to express any view about the future value of the shares, other than the uncertainty derived from factors such as the ones described in this risk factor.
 
Broad market and industry factors could adversely affect the market price of our common shares or ADSs at any time, regardless of our actual operating performance.
 
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common shares.
 
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to achieve and maintain effective internal controls over financial reporting, implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations, which in turn could have a material adverse effect on our business and our common shares or the ADSs. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC. There also could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our consolidated financial statements. Confidence in the reliability of our consolidated financial statements also could suffer if we or our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting. This could in turn limit our access to capital markets and possibly, harm our results of operations, and lead to a decline in the trading price of our common shares or the ADSs.
 
We will be required to disclose changes made in our internal controls and procedures and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” until December 31, 2023, although circumstances could cause us to lose that status earlier (see “—We are an “emerging growth company” and are availing ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make the ADSs or our common shares less attractive to investors.”) An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
 
 
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The protections afforded to minority shareholders in Argentina are different from and more limited than those in the United States and may be more difficult to enforce
 
Under Argentine law, the protections afforded to minority shareholders are different from, and much more limited than, those in the United States. For example, the legal framework with respect to shareholder disputes, such as derivative lawsuits and class actions, is less developed under Argentine law than under U.S. law as a result of Argentinas short history with these types of claims and few successful cases. In addition, there are different procedural requirements for bringing these types of shareholder lawsuits. As a result, it may be more difficult for our minority shareholders to enforce their rights against us or our directors or controlling shareholder than it would be for shareholders of a U.S. company.
 
Holders of our common shares may determine not to pay any dividends
 
In accordance with the Argentine General Corporate Law 19,550, as amended, which we refer to as the Argentine Corporate Law, after allocating at least 5% of our annual net earnings to constitute a mandatory legal reserve, we may pay dividends to shareholders out of net and realized profits, if any, as set forth in our consolidated financial statements prepared in accordance with IFRS. The approval, amount and payment of dividends are subject to the approval by our shareholders at our annual ordinary shareholders’ meeting. The approval of dividends requires the affirmative vote of a majority of the shareholders entitled to vote at the meeting. As a result, we cannot assure you that we will be able to generate enough net and realized profits so as to pay dividends or that our shareholders will decide that dividends will be paid.
 
We may be a passive foreign investment company for U.S. federal income tax purposes
 
A non-U.S. corporation will be considered a passive foreign investment company, which we refer to as a PFIC, for U.S. federal income tax purposes in any taxable year in which 75% or more of its gross income is passive income or 50% or more of its assets (determined based on a quarterly average) constitute passive assets. The determination as to whether a non-U.S. corporation is a PFIC is based upon the application of complex U.S. federal income tax rules (which are subject to differing interpretations), the composition of income and assets of the non-U.S. corporation from time to time and, in certain cases, the nature of the activities performed by its officers and employees.
 
Based upon our current and projected income, assets and activities, we do not expect to be considered a PFIC for our current taxable year or for future taxable years. However, because the determination of whether we are a PFIC will be based upon the composition of our income, assets and the nature of our business, as well as the income, assets and business of entities in which we hold at least a 25% interest, from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that we will not be considered a PFIC for any taxable year.
 
If we are a PFIC for any taxable year during which a U.S. Holder, as defined in “Item 10.E. TaxationCertain United States Federal Income Tax Considerations, holds the ADSs or common shares, the U.S. Holder might be subject to increased U.S. federal income tax liability and to additional reporting obligations. See “Item 10.E. TaxationCertain United States Federal Income Tax ConsiderationsPassive Foreign Investment Company. U.S. Holders are encouraged to consult their own tax advisors regarding the applicability of the PFIC rules to their purchase, ownership and disposition of the ADSs or common shares.
 
The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business
 
Since the global offering, we are required to comply with various regulatory and reporting requirements, including those required by the Commission in addition to our existing reporting requirements by the CNV. Complying with these reporting and regulatory requirements will be time consuming, resulting in increased costs to us or other adverse consequences. As a public company, we will be subject to the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act, as well as to the Argentine Capital Markets Law and CNV rules. These requirements may place a strain on our systems and resources. The Exchange Act applicable to us requires that we file annual and current reports with respect to our business and financial condition. Likewise, CNV rules require that we make annual and quarterly filings and that we comply with disclosure obligations including current reports. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we committed significant resources, hired additional staff and provided additional management oversight. We are implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert managements attention from other business concerns, which could have a material adverse effect on our business, results of operations and financial condition.
 
 
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Item 4. 
Information of the Company
 
Recent Political and Economic Developments in Argentina
 
Since assuming office, the Macri administration has announced and implemented several significant economic and policy reforms, including:
 
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INDEC reforms. On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to the CPI, GDP, poverty and foreign trade data, the Macri administration declared the national statistical system and the INDEC in a state of administrative emergency through December 31, 2016, which was not renewed. The INDEC implemented certain methodological reforms and adjusted certain macroeconomic statistics on the basis of these reforms. See “Item 3.D. Risk FactorsRisks Relating to ArgentinaThe credibility of several Argentine economic indices has been called into question, which has led to a lack of confidence in the Argentine economy and could affect your evaluation of the market value of the ADSs. As of the date of this annual report, the INDEC has published certain revised data, including GDP, poverty, foreign trade and balance of payment statistics.
 
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Agreement with holdout creditors. The Macri administration has reached agreements with a large majority of holdout creditors (in terms of claims) and regained access to the international financial markets for the country. For more information on these agreements, see “Item 3.D. Risk FactorsRisks Relating to ArgentinaA lack of financing for Argentine companies due to the unresolved litigation with holdout bondholders may negatively impact our financial condition or cash flows.
 
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Foreign exchange reforms. The Macri administration eliminated a significant portion of foreign exchange restrictions, including currency controls that were imposed by the previous administration. With the aim of providing more flexibility to the foreign exchange system and promoting competition, the Decree N° 27/2018 published on January 11, 2018 created the free-floating exchange market (the “Exchange Market”). Furthermore, on August 8, 2016, the Central Bank introduced material changes to the foreign exchange regime and established a new framework by means of Communication “A” 6037 and Communication “A” 6244 which significantly eased access to the Exchange Market. Furthermore, on December 26, 2017, by virtue of Communication “A” 6401, the Central Bank replaced the reporting regimes set forth by Communications “A” 3602 and “A” 4237 with a new, unified regime applicable for information as of December 31, 2017. The unified reporting regime involves an annual mandatory statement filing for every person whose total flow of funds or balance of assets and liabilities is or exceeds US$1 million during the previous calendar year. Moreover, by virtue of Communication “A” 6443, which came into force as of March 1, 2018, any company from any sector, which usually operates through the Exchange Market can act as an exchange agency by only registering in the exchange operators’ registry. See “Item 10.D Exchange Controls.”
 
● 
Foreign trade reforms. The Macri administration eliminated or reduced the export duties applicable to several agricultural products and eliminated the export duties applicable to most exports of industrial and mining products. On January 2, 2017, the Argentine government enacted a further reduction of the export duties rate set for soybean and soybean products, setting a monthly 0.5% cut on the export duties rate beginning on January 2018 and until December 2019. In addition, importers were offered short-term debt securities issued by the Argentine government to repay outstanding commercial debt for the import of goods. Notwithstanding the aforementioned, as part of the reform package intended to reduce the fiscal deficit and enhance public accounts, the Executive Branch of Argentina published Decree No. 793/2018, which established a 12% duty on all exported consumption products included in the Mercosur Common Nomenclature, (Nomenclatura Comun del Mercosur) (the “NCM”) that will remain in effect until December 31, 2020. Decree No. 793/2018 caps the rate for export duties on most products at Ps.4.00/U.S.$1.00 based on the taxable base or free on-board value, depending on the product. However, the exchange rate cap for certain products (mainly manufactured goods) is Ps.3.00/U.S.$1.00 of the taxable base or free on-board value, depending on the product. As an additional measure, Decree No. 793/2018 reduced export duties on soybean by-products to 18%, 16% or 11%, depending on the product.
 
● 
Fiscal policy. The Macri administration took steps to anchor the fiscal accounts, reducing the primary fiscal deficit by approximately 1.3% of GDP in December 2015 through a series of taxation and other measures and announced its intention to reduce the primary fiscal deficit in 2016 and 2017 from approximately 5.8% of GDP in 2015, in part by eliminating public services subsidies that were in place, such as those applying to electric power and gas services. For 2017 and 2018, the aggregate primary fiscal deficit was reported to be 3.8% and 2.4% of GDP, respectively. The Macri administration’s aim is to achieve a primary fiscal deficit of 2.2% GDP in 2019, and 1.2% in 2020.
 
 
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Correction of monetary imbalances and changes in monetary policy. The Central Bank aims to ensure that, in the period from October 2018 until June 2019, the monetary base will register a zero growth (based on a monthly average), through its Monetary Aggregates Regime (Agregados Monetarios) as agreed in the 2018 IMF Agreement. On September 28, 2018, in connection with the 2018 IMF Agreement, the Monetary Policy Committee of the Central Bank announced the goal of achieving a zero percent growth rate in the monetary base until June 2019. This monetary goal would be achieved through daily operations of LELIQS, which began on October 1, 2018. LELIQS are seven-day peso-denominated securities that can be purchased exclusively by banks. On the first tender offer of LELIQS, the Central Bank awarded Ps.71,060 million at a 67.1% average rate. The Central Bank is expected to continue to perform daily operations of LELIQS until the zero percent goal is achieved. See “Item 3.D. Risk Factors—Risks Relating to Argentina—Significant fluctuations in the value of the peso could adversely affect the Argentine economy and, in turn, adversely affect our results of operations” and “—the IMF Agreement” below.
 
● 
Domestic capital markets. On May 9, 2018, the Productive Financing Law No. 27,440 was enacted. This law amends the existing legislation with the aim of promoting the development of the domestic capital markets. The Productive Financing Law seeks, among other things, to broaden the base of investors and companies that take part in the capital markets, promoting financing especially for micro-, small- and medium-sized companies (“MiPyMEs”) seeking to create a framework which eases access to financing for such companies. Furthermore, the law eliminates certain controversial articles of the previous Capital Markets Law No. 26,831 which gave the CNV the authority to intervene the management of publicly traded companies. (See “Item 3.D. Risk FactorsRisks Relating to ArgentinaGovernment intervention may adversely affect the Argentine economy and, as a result, our business and results of operations.”)
 
● 
Corporate Criminal Liability Law (Ley de Responsabilidad Penal Empresaria): On November 8, 2017, the Lower House of the Argentine Congress approved the bill (Law No. 27,401) providing for the criminal liability of corporate entities for criminal offences against public administration and transnational bribery committed by, among others, its attorneys-in-fact, directors, managers, employees, or representatives. According to the law, a company may be held liable if such offences were committed, directly or indirectly, in its name, behalf or interest, the company obtained or may have obtained a benefit therefrom, and the offence resulted from a company’s ineffective control. Companies found liable under this law may be subject to various sanctions, including, among others, fines ranging from two to five times of the undue benefit obtained, total or partial suspension of commercial activities, suspension to participate in bidding processes or activity linked to the National State, dissolution and liquidation of legal status, loss or suspension of benefits or government subsidies that they may have and the publication of the conviction sentence for two days, in a national newspaper.
 
● 
Social security reform bill. On December 19, 2017, the Argentine Congress passed the social security reform bill which, among other amendments, modified the adjustment formula in the retirement system with a view to supplying the necessary funds of ANSES to guarantee that retirees who earn the minimum pension receive 82% of the minimum salary. Social security payments shall be subject to a certain adjustment formula to be applied every year in March, June, September and December. The formula to calculate the security payments shall be based (i) 70% on the CPI published by INDEC and (ii) 30% on the Remuneración Imponible Promedio de los Trabajadores Estables (“RIPTE” per its initials in Spanish) variation, which is an indicator published by the Ministry of Labor which measures the evolution of public sector salaries. Moreover, instead of the biannual increase, a quarterly increase will be applied. After the passing of the draft bill, on December 20, 2017, Decree No. 1058 was published and, with the aim of avoiding divergence with the application of the previous formula, established a compensatory bonus for retirees, pensioners and beneficiaries of the universal insurance per child (asignación universal por hijo).
 
● 
Tax reform. On December 27, 2017, the Argentine Congress approved a tax reform that was published on December 29, 2017 as Law No. 27,430 (the “Tax Reform”). The reform is intended to eliminate certain inefficiencies in the Argentine tax regime, diminish tax evasion, broaden income taxes to cover more individuals and encourage investment, with the long-term goal of restoring fiscal balance. The reform is part of a larger program announced by President Macri, intended to increase employment, make the Argentine economy more competitive (by reducing the fiscal deficit, for example) and sustainably diminish poverty. The main aspects of the Tax Reform include: (i) capital gains realized by individuals that are Argentine tax residents on sales of real estate (subject to certain exceptions, including a primary residence exemption) acquired after January 1, 2018 will be subject to tax at the rate of 15%, calculated on the difference between the transfer price and the acquisition cost adjusted for inflation; (ii) income obtained from currently exempt bank deposits and sales of securities (including government securities) by individuals that are Argentine tax residents, will be subject to tax at the rate of (a) 5% in the case of those denominated in Pesos, subject to fixed interest rate and not indexed, and (b) 15% for those denominated in a foreign currency or indexed; (iii) income obtained from the sales of shares made on an Argentine stock exchange will be exempt, subject to compliance with certain requirements; (iv) corporate income tax rate will initially decline to 30% for fiscal periods starting after January 1, 2018 and up to December 31, 2019 and to 25% for fiscal periods starting after January 1, 2020; (v) social security contributions will be gradually increased to 19.5% starting in 2022, in lieu of the differential scales currently in effect; and (iv) the percentage of tax debits and credits that can be credited towards income tax will be gradually increased over a five year period. In addition, on April 9, 2018, Decree No. 279/2018 was published in the Official Gazette and General Resolution (AFIP) No. 4227/2018 was published on April 12, 2018 regulating the Tax Reform Law relating to, among other aspects, the income tax applicable to Foreign Beneficiaries derived from financial transactions. Decree No. 1170/2018 was published on December 27, 2018 introducing the implementing regulations of the Tax Reform. For further information, see “Item 10.E. Taxation—Material Argentine Tax Considerations” below.
 
 
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● 
National electric power state of emergency and reforms. Following years of very limited investment in the energy sector, as well as the continued freeze on electric power and natural gas tariffs since the 2001-2002 economic crisis, Argentina began to experience energy shortages in 2011. In response to the growing energy crisis. In December 2015, the Macri administration declared a state of emergency with respect to the national electric power system, which remained in effect until December 31, 2017. The state of emergency allowed the Argentine government to take actions designed to ensure the supply of electric power to the country, such as instructing the Ministry of Energy and Mining to design and implement, with the cooperation of all federal public entities, a coordinated program to guarantee the quality and security of the electric power system. In addition, the Macri administration announced the elimination of certain energy subsidies and a substantial increase in electric power rates. By correcting tariffs and subsidies and modifying the regulatory framework, the Macri administration aims to correct distortions in the energy sector and stimulate investment. Following tariff increases, preliminary injunctions suspending such increases were requested by customers, politicians and non-governmental organizations that defend customers rights, which preliminary injunctions were granted by Argentine courts. Among the different rulings in this respect, two separate rulings led to the suspension of end-users tariff increases of electric power in the Province of Buenos Aires and in the whole territory of Argentina. However, on September 6, 2016, the Supreme Court denied these injunctions that suspended end-users electric power tariff increases, arguing formal objections and procedural defects and therefore, as of the date of this annual report, increases of the electric power end-users tariffs are not suspended.  In addition, to further address the potential impact of the new tariff scheme during the 2018 winter peak season of natural gas consumption by retail customers, an optional program was implemented through Resolution No. 97/2018 issued by the Argentine Gas Regulator (Ente Nacional Regulador del Gas) under which consumers would finance the payment of up to 25% of natural gas monthly bills for the 2018 winter peak season. Finally, on May 9, 2018, the lower house of the National Congress approved a bill to modify the current tariff scheme for natural gas for local companies and PyMES and the Senate approved it on May 30, 2018, however, the President vetoed it on the same day.
 
● 
Public Private Participation Law. On November 16, 2016, the Public Private Participation Law was passed by Congress, and has been regulated by Decree No. 118/2017. This new regime seeks to replace existing regulatory frameworks (Decrees Nos. 1299/00 and 967/05) and supports the use of public price participation schemes for a large variety of purposes including the design, construction, extension, improvement, provision, exploitation and/or operation and financing of infrastructure development, provision of services or other activities, provision of services productive, investments, applied research, technological innovation and associated services. The Public Participation Law also includes certain protection mechanisms in favor of the private sector (contractors and lenders) in order to promote the development of these associative schemes.
 
● 
Fiscal consensus. In addition, on November 16, 2017, the Argentine government, the governors of the majority of Argentine provinces, including the Province of Buenos Aires, and the Head of Government of the City of Buenos Aires entered into an agreement pursuant to which some guidelines were established in order to harmonize the tax structures of the different provinces and the City of Buenos Aires. Among other commitments, the provinces and the City of Buenos Aires agreed to gradually reduce the tax rates applicable to stamp tax and turnover tax within a five-year period and withdraw their judicial claims against the Argentine government in connection with the federal co-participation regime. In exchange for this, the Argentine government, among other commitments, agreed to (i) compensate the provinces and the City of Buenos Aires (provided they enter into the agreement) for the effective reduction of its resources in 2018, resulting from the proposed elimination of section 104 of Law No. 20,628 and amendments (the “Income Tax Law”), quarterly updating such compensation in the following years, and (ii) issue a 11-year bond where funds generate services for Ps.5,000 million in 2018 and Ps.12,000 every year starting from 2019, to be distributed among all the provinces, with the exception of the Province of Buenos Aires and the City of Buenos Aires, according to the effective distribution coefficients resulting from the federal co-participation regime. The provincial governments which took part in this agreement have committed to file, within the next 30 days after the execution of the agreement, the necessary draft bills for its implementation and authorize their respective executive branches to ensure its fulfilment. This agreement shall only be effective in those provinces where the respective legislative branches have passed it. In this sense, on December 22, 2017, the Argentine Congress passed the projects on fiscal consensus and fiscal liability (“Consenso Fiscal” and “Responsabilidad Fiscal,” respectively), with some amendments. As of the date of this annual report, all of the provinces and the City of Buenos Aires, except for provinces of San Luis and La Pampa, have entered into this agreement.
 
 
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Increase in public transportation tariffs. As a part of a comprehensive program for public transportation tariffs, during 2018, Argentina implemented several increases in the tariffs for public transportation, as well as a new multi-disciplinary system for riders utilizing multiple public transport platforms.
 
● 
IMF Agreement. On June 7, 2018, Argentina and the IMF announced that a technical agreement on a U.S.$50 billion three-year stand-by agreement was reached, which was approved on June 20, 2018, by the IMF’s Executive Board (the “IMF Agreement”). On June 21, 2018, the IMF made the first disbursement under the IMF Agreement in an amount of U.S.$15 billion. Notwithstanding the foregoing, on September 26, 2018, Argentina announced that a revised technical agreement with the IMF was reached, which underpinned the IMF Agreement. The revised agreement with the IMF was approved by the IMF’s Executive Board on October 26, 2018 (the “Revised Agreement” and together with the IMF Agreement, the “2018 IMF Agreement”), and includes an increase in the IMF’s available funds by U.S.$19 billion through the end of 2019 and brings the total amount available under the program to U.S.$57.1 billion through 2021. On October 30, 2018, the Argentine government received the first disbursement under the Revised Agreement from the IMF in an aggregate amount of U.S.$5.7 billion. In addition, the funds available under the 2018 IMF Agreement will no longer be treated as precautionary, as the authorities have indicated that they intend to use IMF financing for budget support. In return, the Argentine government covenanted to make progress in order to achieve fiscal balance by 2019, bringing the primary deficit to 0% of GDP in that year and surplus of 1% in 2020 and, in turn, the Central Bank will not be able to raise the base monetary policy until June 2019. Moreover, as of October 1, 2018, the BCRA introduced an exchange rate band. The peso’s exchange rate with the U.S. Dollar was allowed to fluctuate between Ps.34.00 and Ps.44.00 per US$1.00 (range that was adjusted daily at an annual rate of 3% until December 2018, and for the first quarter of 2019, is adjusted daily at an annual rate of 2%) without the BCRA’s intervention. On April 29, 2019, the Monetary Policy Counsel (Comité de Política Monetaria) of the Central Bank (the “COPOM”) decided to introduce changes to the monetary policy, with an aim to reducing volatility in the foreign exchange market. According to the new scheme: (i) if the exchange rate is between Ps. 39.755 and Ps. 51.488, the Central Bank may intervene, subject to market conditions, in the foreign exchange market and sell U.S. dollars in the market, and (ii) if the exchange rate is above Ps. 51.488, the Central Bank will sell foreign currency for up to 250 million U.S. dollars daily. Also, the Central Bank could decide to perform additional interventions. The Argentine pesos resulting from such sales will be discounted from the monetary base. The COPOM also confirmed that the Central Bank will not intervene until June 2019 in the foreign exchange market if the exchange rate decreases below Ps. 39.755.

● 
Ministries Reforms. On September 3, 2018, President Macri announced that the number of ministries would be reduced from 19 to 10.
 
● 
Asset Seizure Decree: On January 22, 2019, the Macri administration published the Decree No.62/2019 related to asset seizure (Extinción de Dominio), which allows courts to seize assets found related to acts of corruption or drug smuggling, whether the defendant has been found guilty or not before a criminal court. The aforementioned Decree also includes provisions for the creation of a special Ombudsman's Office to monitor future asset seizures.
 
● 
Resolution SRRyME No. 1/19: By means of this resolution, the Secretary of Renewable Resources and Electric Market of the National Ministry of Economy modified the remuneration scheme (for capacity and energy) applicable to Authorized Generators (electricity generators which do not have contracts in the term market in any of its modalities) acting in the WEM. According to the recitals of this resolution, the remuneration scheme set forth therein aims at being applied transitorily, until the gradual definition and implementation of regulatory mechanisms oriented at achieving an autonomous, competitive and sustainable operation that allows the free contracting between offer and demand, and a technical, economical and operational functioning that makes it possible to integrate the different generation technologies to ensure a trustworthy system at a minimal cost. For further detail, please see “Item 4.B. Business Overview—The Argentine Electric Power Sector—Remuneration Scheme—The Current Remuneration Scheme”.
 
Pursuant to Resolution No. 522/16, the ENRE ordered a public hearing to be held to evaluate the proposals for the full tariff review filed by EDENOR and EDESUR for the period beginning January 1, 2017 to December 31, 2021. The hearing was held on October 28, 2016 and, following such hearing, on January 31, 2017, the ENRE issued Resolution No. 63/17, by virtue of which such administrative authority approved the tariffs to be applied by EDENOR. Similarly, Resolution No. 64/17 approved EDESURs tariffs. With regards to transmission tariffs, seven public hearings were held pursuant to Resolutions Nos. 601/16, 602/16, 603/16, 604/16, 605/16, 606/16, 607/16 of the ENRE. In such public hearings the tariff proposals filed by transmission companies Transener S.A, Distrocuyo S.A., Transcomahue S.A., Ente Provincial de Energía de Neuquén, Transba S.A., Transnea S.A., Transnoa S.A., and Transpa S.A. for the period beginning January 1, 2017 to December 31, 2021 were evaluated. Pursuant to Resolutions Nos. 66/17, 68/17, 69/17, 71/17, 73/17, 75/17, 77/17 and 79/17, the ENRE approved the new applicable tariffs of such companies.
 
 
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See “Item 3.D. Risk Factors— Risks Relating to Argentina—Economic and political developments in Argentina, including the upcoming presidential and congressional elections, and future policies of the Argentine government, may affect the economy, as well as the operations of the energy industry, including the operations of Central Puerto.”
 
Recent Developments
 
Brigadier López Plant - National and International Public Bid No. CTBL 01/2018 (the “IEASA Bid”) called by Integracion Energética Argentina S.A. (“IEASA”)
 
On February 27, 2019, Central Puerto was notified that it had been awarded the IEASA Bid called by IEASA to acquire the Central Termoeléctrica Brigadier López power plant (the “Brigadier López Power Plant”) and certain assets and liabilities relating to such plant.
 
Pursuant to the terms of the IEASA Bid, Central Puerto would be subject to a US$ 10 million penalty if it failed to honor its obligations under the terms and conditions of the IEASA Bid. Regarding this, we provided IEASA with a US$ 10 million first demand guarantee for the maintenance of the offer, which guarantee expires on May 31, 2019 and entitles IEASA to execute it if we fail to honor our obligations under the terms and conditions of the IEASA Bid. If IEASA does not execute the first demand guarantee within 7 days after its expiration, such first demand guarantee will terminate.
 
In addition, the acquisition of the Brigadier López Power Plant was subject to the satisfaction of certain conditions that had to occur prior to April 1, 2019. As of the date of this annual report, the acquisition of the Brigadier López Power Plant could not be consummated given that certain conditions to the IEASA Bid were not satisfied, such as the proper issuance by CNV of an unconditional authorization to the terms of the amended financial trust agreement relating to the Brigadier Lopez Power Plant. In addition, there is a discrepancy between Central Puerto and IEASA regarding the satisfaction of certain conditions upon which closing of the acquisition of the Brigadier López Power Plant was subject to. Also, Resolution SRRyME N° 1/2019 adversely affected our ability to obtain financing in connection with the acquisition of the Brigadier Lopez Power Plant. As of the original closing date, April 1, 2019, certain of the conditions to closing of the acquisition had not been satisfied, and an extension of such closing date was necessary. However, Central Puerto and IEASA failed to agree on such extension. On April 26, 2019, Central Puerto duly notified IEASA of such failure to agree on an extension.
 
Borrowing from KFW
 
On March 26, 2019 the Company, as borrower, entered into a loan agreement with Kreditanstalt für Wiederaufbau (“KfW”) for an amount of US $ 56,000,000 to finance the acquisition of two SGT-800 gas turbines (with a power of 89 MW) and equipment from Siemens Industrial Turbomachinery AB, Sweden, (“Siemens Sweden”) and related services from Siemens S.A., Argentina, (“Siemens Argentina”) for the Luján de Cuyo project. To secure our obligations under the loan agreement with KfW, we have agreed to maintain a cash reserve account pledged in favor of KfW. The loan agreement also contains other customary covenants and events of default for facilities of this type, and is governed by German law. As of the date of this annual report, we are working to satisfy all the conditions prior to the disbursement of this loan.
 
Collection from CVO Agreement
 
Effective as of March 20, 2018, CAMMESA granted the CVO Commercial Approval in the WEM, as a combined cycle, of the thermal plant Central Vuelta de Obligado, which entitled us to receive the collection of the trade receivables under the CVO Agreement. A PPA between the CVO Trust and CAMMESA, through which the CVO Trust makes energy sales and, consequently, receives the cash flow to pay the trade receivables, had to be signed in order to start the collections.
 
The PPA agreement was signed on February 7, 2019, with retroactive effect to March 20, 2018.
 
As a result, the original amortization schedule from the CVO Agreement is in full force and effect.
 
The unpaid installments corresponding to the March-December 2018 period add up to US$ 78.15 million (including VAT, corresponding to installments 1 to 10). As of the day of this annual report, we continue in negotiations with CAMMESA to collect such unpaid amounts as soon as possible, plus the accrued interest between each due date and the effective payment date.
 
Despite the referred unpaid installments, as of the date of this annual report, we received the payment related to January and February 2019 (corresponding to installments 11 and 12, respectively) pursuant to the CVO Agreement’s original disbursement schedule, at the exchange rate of the last date of each month, on its respective due dates, in March and April 2019, respectively.
 
We are also entitled to receive the foreign exchange difference accrued for the CVO trade receivables, between the last date of the month of each installment, and the day prior to the due date of such installment. These amounts should be paid one day after the due date of the payment of each CVO installment. However, for the January 2019 the CVO installment, with due date on March 14, 2019, the foreign exchange difference was payed on April 5, 2019. The foreign exchange difference on the February 2019 CVO installment has not been collected as of the date of this annual report.
 
 
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Shareholders General Meeting
 
On March 11, 2019, the Board of Directors of Central Puerto convened an Ordinary and Extraordinary Shareholders General Meeting for April 30, 2019, to discuss the following items of the agenda: (i) Appointment of two shareholders to execute the minute; (ii) Consideration of the fiscal year ended on December 31, 2018; (iii) Consideration of the result of the exercise and the rest of the results not assigned and the proposal of the Board of Directors; (iv) Consideration and approval of the payment of the Profit Sharing Bonds for Personnel (Bono de Participación) provided in articles 12 and 13 of the by-laws; (v) Consideration of the performance of the Board of Directors of the Company in the fiscal year ended on December 31, 2018; (v) Consideration of the performance of the Supervisory Committee of the Company in the fiscal year ended on December 31, 2018.; (vi) Consideration of the remunerations of the members of the Board of Directors of the Company for the fiscal year ended on December 31, 2018; (vi) Consideration of the advance payment of fees to the Board of Directors for the fiscal year that will end on December 31, 2019; (vii) Consideration of the remuneration of the members of the Supervisory Committee of the Company regarding to the fiscal year ended on December 31, 2018, and the fees regime for the fiscal year that will end on December 31, 2019; (viii) Determination of the number of members of the Alternate Board of Directors, and appointment of the members of the Board of Directors regular and alternates. Continuity of the current president until the appointment to be made by the Company’s Board of Directors; (ix) Appointment of the members of the Supervisory Committee, regular and alternate, for the fiscal year that will close on December 31, 2019; (x) Consideration of the remuneration of the accountant of the Company, regarding to the annual accounting documentation for the fiscal year 2018; (xi) Appointment of the regular and alternate accountant for the fiscal year that will end on December 31, 2019; (xii) Approval of the Annual Budget for the operation of the Audit Committee; and (xiii) Granting of authorizations.
 
 Item 4.A 
History and development of the Company
 
Central Puerto S.A. is incorporated as a sociedad anónima under the laws of Argentina. Our principal executive offices are located at Avenida Thomas Edison 2701, C1104BAB Buenos Aires, Republic of Argentina. Our telephone number is +54 (11) 4317-5900.
 
We were incorporated pursuant to Executive Decree No. 122/92 on February 26, 1992. We were formed in connection with the privatization process involving Servicios Eléctricos del Gran Buenos Aires (SEGBA) in which SEGBAs electric power generation, transportation, distribution and sales activities were privatized. We were registered with the Public Registry of Commerce of the City of Buenos Aires on March 13, 1992 and created for a term of 99 years from the date of such registration.
 
In April 1992, Central Puerto, the consortium-awardee, took possession over SEGBAs Central Nuevo Puerto (Nuevo Puerto) and Central Puerto Nuevo (Puerto Nuevo) plants, and we began operations. In November 1999, the Puerto combined cycle plant, which was built on lands owned by Nuevo Puerto in the City of Buenos Aires, started to operate. In 2001, Central Puerto was acquired by the French company, Total S.A. At the end of 2006, Sociedad Argentina de Energía S.A. (SADESA) acquired a controlling interest in Central Puerto.
 
Our shares are listed on the Argentine stock market Bolsas y Mercados Argentinos S.A. (the “BYMA”) and, since February 2, 2018, have been listed on the NYSE under the symbol CEPU.
 
The SEC maintains an internet site that contains reports and other information regarding issuers who, like us, file electronically with the SEC. The address of that website is http://www.sec.gov. Central Puerto routinely posts important information for investors in the Investor Relations support section on its website, www.centralpuerto.com. From time to time, Central Puerto may use its website as a channel of distribution of material Company information. Accordingly, investors should monitor Central Puerto’s Investor Support website, in addition to following the Company’s press releases, SEC filings, public conference calls and webcasts. The information contained on, or that may be accessed through, the Company’s website is not incorporated by reference into, and is not a part of, this annual report.
 
 
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The below chart illustrates the development of our company through the years and the important milestones for Central Puerto and for the companies that were absorbed in the 2014 Merger and 2016 Merger:
 
 
The 2014 Merger
 
On October 1, 2014, we merged with three operating companies under the common control of SADESA: (i) HPDA, (ii) CTM and (iii) LPC. The purpose of the merger was to optimize operations and achieve synergies among the businesses. As a result of the merger, we increased our share capital from Ps.88,505,982 to Ps.199,742,158. We refer to this merger as the 2014 Merger. Following the 2014 Merger, each of HPDA, CTM and LPC were dissolved.
 
Prior to the 2014 Merger, we owned and operated three thermal generation plants for electric power generation located within one complex in the City of Buenos Aires. Our Nuevo Puerto and Puerto Nuevo thermal generation plants are equipped with five steam turbine-generator units in the aggregate and have an installed capacity of 360 MW and 589MW, respectively. The third plant, the Puerto combined cycle plant has two gas turbines, two heat recovery steam generators and a steam turbine, and it has a total installed capacity of 765 MW. Prior to the 2014 Merger, we had a total installed capacity of 1,714 MW and were already one of the major SADI electric power generators.
 
As a result of the 2014 Merger, we added the Luján de Cuyo plant, the La Plata plant, which, effective as of January 5, 2018, we sold to YPF EE (for further information see “Item 4.A. History and development of the Company—La Plata Plant Sale), and the Piedra del Águila hydroelectric complex.
 
As of December 31, 2018, we owned and operated five thermal generation plants, one hydroelectric generation plant and two wind farms, for the generation of electric power across six complexes in Argentina. We had a combined installed capacity of 3,810 MW and have significantly improved our position as a major SADI electric power generator, producing approximately 17.0% of the energy generated by private sector SADI generators in 2018.
 
Hidroeléctrica Piedra del Águila S.A. (HPDA)
 
HPDA was a sociedad anónima (corporation) incorporated in 1993 that operated the Piedra del Águila hydroelectric complex with an installed capacity of 1,440MW since it started commercial operation in 1993. HPDA entered into the HPDA Concession Agreement (as defined below) to operate and maintain the Piedra del Águila hydroelectric complex, and the HPDA Concession Agreement was assigned to us during the 2014 Merger. For more information regarding the HPDA and the HPDA Concession Agreement, see “—Electricity Generation from our Hydroelectric ComplexPiedra del Águila.
 
HPDAs controlling shareholder was Hidroneuquén S.A. (HNQ), a company that was under the control of the SADESA group, which held a 59.00% interest. The remaining shareholders were: (i) the Argentine government (26.00% interest), (ii) the Province of Neuquén (13.00% interest) and (iii) HPDAs Employee Stock Ownership Program (2.00% interest). HPDA held 21.00% of the shares of CVOSA, the company that operates the thermal power plant in Timbues. Following the 2014 Merger, CVOSA became our subsidiary.
 
 
39
 
 
Centrales Térmicas Mendoza S.A. (CTM)
 
CTM was a sociedad anónima (corporation) incorporated in 1993 focused on electric power generation and steam production. Before the 2014 merger, CTM was focused on two primary activities: electric power generation and steam production. CTM owned the Luján de Cuyo plant located in Luján de Cuyo in the Province of Mendoza, which began commercial operation in 1971 with the installation of its first two steam turbines, had an installed capacity of 509 MW and was the top producer of electric power in the Cuyo region. For more information regarding CTMs operations that were transferred to us in the 2014 Merger, see “—Electricity Generation from our Thermal Generation PlantsLuján de Cuyo plant.
 
CTMs controlling shareholder was Operating S.A. (OSA), a company that was under the control of the SADESA group and which held a 94.10% interest. The other shareholder was Empresa Mendocina de Energía SAPEM, which held the remaining 5.89% interest. CTM held a minority interest in CVOSA, representing 9.36% of its capital stock.
 
La Plata Cogeneración S.A. (LPC)
 
LPC was a sociedad anónima (corporation) incorporated originally under the name CMS Ensenada S.A. in 1994. LPCs principal business activities were electric power generation and steam production. On August 23, 1994, LPC entered into a unión transitoria de empresas (similar to a joint venture) with Empresa de Energía y Vapor S.A. In March 1997, LPC acquired Empresa de Energía y Vapor S.A. LPC owned the La Plata plant, which has an installed capacity of 128 MW and started its operations in 1997. The La Plata plant is installed on property owned by YPFs La Plata refinery, and it is the first co-generation plant commissioned as such within the WEM. For more information regarding LPCs operations that were transferred to us in the 2014 Merger, see “—Electricity Generation from our Thermal Generation PlantsLa Plata Plant.
 
LPCs controlling shareholder was OSA, which held a 96.69% interest. The other shareholder was Proener S.A.U., which held the remaining 3.31% interest. LPC held minority interests in (i) CVOSA, representing 9.36% of its stock capital, (ii) Central Puerto, representing 14.03% of its stock capital, and (iii) OSA, representing 3.21% of its stock capital.
 
Effective as of January 5, 2018, we sold the La Plata plant to YPF EE. For further information, see “Item 4.A. History and development of the Company—La Plata Plant Sale”).
 
Distribuidora de Gas Cuyana S.A. (DGCU) and Distribuidora de Gas del Centro S.A. (DGCE)
 
In addition, on January 7, 2015, acting individually, but simultaneously with other investors, we acquired non-controlling equity interests in DGCU (whose shares are listed on BYMA) and DGCE. Taking into account direct and indirect interests, we acquired (i) a 22.49% equity stake in DGCU and (ii) a 39.69% equity stake in DGCE.
 
DGCU
 
DGCU was incorporated in 1992 by the Argentine government as part of the privatization of Gas del Estado S.E. (GES). The executive branch enacted Executive Order No. 2,453 in December 1992, whereby it granted a utility license to DGCU to distribute Natural gas through the networks in the provinces of Mendoza, San Juan and San Luis, for a term of 35 years from the date of taking possession (which occurred on December 28, 1992) with an option to extend it for ten additional years.
 
In December 1992, a transfer agreement was executed to transfer 60.00% of DGCUs shares. The agreement was entered into among the Argentine government, GES, the Province of Mendoza and IGCU, which formed the consortium that became the successful bidder in the bidding process at such time. On such date, GES transferred to DGCU the assets used in the licensed utility service, net of liabilities, as an irrevocable capital contribution pursuant to Executive Orders No. 1,189/92 and 2,453/92, and DGCU took possession of the facilities and commenced operations.
 
As of the date of this annual report, IGCU holds a 51.00% interest in DGCU, and we hold a 44.10% interest in IGCU. Therefore, we indirectly hold a 22.49% equity interest in DGCU.
 
DGCE
 
DGCE was incorporated in 1992 by the Argentine government as part of the privatization of GES. The executive branch enacted Executive Order No. 2,454/92 in December 1992, whereby it granted a utility license to DGCE to distribute natural gas through the networks in the provinces of Córdoba, Catamarca and La Rioja for a term of 35 years from the date of taking possession (which occurred on December 28, 1992) with an option to extend it for ten additional years.
 
 
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In December 1992, a transfer agreement was executed to transfer 60.00% of DGCEs shares. The agreement was entered into among the Argentine government, GES and IGCE, which formed the consortium that became the successful bidder in the bidding process at such time. On such date, GES. transferred to DGCE the assets used in the licensed utility service, net of liabilities, as an irrevocable capital contribution pursuant to Executive Orders No. 1,189/92 and 2,454/92, and DGCE took possession of the facilities and commenced operations.
 
As of the date of this annual report, we hold a 44.10% interest in IGCE and a direct 17.20% interest in DGCE. Therefore, we hold, both directly and indirectly, a 39.69% in DGCE.
 
IGCE is the controlling shareholder of Energía Sudamericana S.A. (ESSA), which is a private company not listed in any commercial stock exchange, and which prepares its financial statements in accordance with Argentine GAAP. However, there are no relevant differences between Argentine GAAP applicable to ESSA and the IFRS that we apply to our financial statements. ESSAs principal activity is the sale of natural gas. We also own a 2.45% direct equity interest in ESSA.
 
Ecogas had a gas distribution network covering 31,637 km and served approximately 1,330,923 customers as of December 31, 2018. In 2017, Ecogas distributed an average of 14.21 million cubic meters of natural gas per day; and in 2018, Ecogas distributed an average of 13.80 million cubic meters of natural gas per day. This volume of distribution represented approximately 15.70% and 14.21% of the gas delivered by all the distribution companies in Argentina in 2018 and in 2017, respectively, according to data from Ecogas.
 
Potential sale of our interes in Ecogas
 
At a meeting of our shareholders on December 16, 2016, in accordance with the strategic objective of focusing on assets within the energy industry, the shareholders considered a potential sale of our equity interests in Ecogas to Magna Energía S.A., but voted to postpone the decision.
 
We are currently assessing various strategic opportunities regarding DGCU and DGCE, including a possible partial or total sale of our equity interest in them. On January 26, 2018, the shareholders of DGCE approved the admission of DGCE to the public offering regime in Argentina. On March 14, 2018, the Company authorized the offer of up to 10,075,952 common class B shares of DGCE with a face value of one Argentine peso (Ps. 1) per share, in a potential public offering authorized by the CNV, subject to market conditions. This authorization was encompassed within the February 23, 2018 authorization of the Board of Directors of Central Puerto, for the sale of up to 27,597,032 common B shares of DGCE. As of the date of this annual report, we continue to evaluate this strategy.
 
Control Acquisition by Tender Offer of Third Parties in respect of DGCU shares
 
On January 7, 2015, the Company acquired 49% of interests in IGCU, the parent company of DGCU and, as a result, the Company held indirectly 24.49% of DGCUs capital stock. Following this acquisition, Magna, RPBC , Central Puerto and Mr. Federico Tomasevich (jointly, the Offerors) resolved to participate proportionally in the tender offer for DGCUs shares with voting rights that were publicly listed on the BYMA in order to acquire the remaining outstanding shares of DGCU that the Offerors did not already own. On October 30, 2015, the board of directors of the CNV approved the tender offer. Upon termination of the offer in January 2016, since no acceptances were tendered, no shares were acquired in this tender offer. As of the date of this annual report, we own a 44.10% interest in IGCU and, as a result, we indirectly hold a 22.49% equity interest in DGCU. For further information on the potential merger of IGCE and IGCU, see “—Preliminary Merger Agreement between IGCE, IGCU, RPBC and MAGNA.”
 
Preliminary Merger Agreement between IGCE, IGCU, RPBC and MAGNA
 
On March 28, 2018, the Board of Directors of IGCE, IGCU, RPBC Gas S.A. (“RPBC”) and Magna Inversiones S.A. (“Magna”), approved the Preliminary Merger Agreement (Compromiso Previo de Fusión) of the aforementioned companies (the “Merger”), in which IGCE will act as the surviving company and IGCU, RPBC and Magna, as absorbed companies.
 
On July 23, 2018, the merging companies’ resolutions resolved to (i) approve the use of the balance sheets of the merging companies as of December 31, 2017, as special merger balances; (ii) approve the General Consolidated Special Balance Sheet of Merger as of December 31, 2017; (iii) approve the merger of the merging companies, ad referendum of the approval of the National Gas Regulation Entity (Ente Nacional Regulador del Gas) (ENARGAS); (iv) ratify the Preliminary Merger Agreement; (v) approve the exchange ratio of the merger; (vi) approve the early dissolution without liquidation of MAGNA, RPBC and IGCU, ad referendum of the approval of ENARGAS; and (vii) authorize the President or the Vice President of the merging companies, in case of absence or impediment of the President, to agree the text and execute the final merger agreement.
 
 
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On January 11, 2019, ENARGAS issued a resolution not granting authorization for the Merger under the terms agreed among the entities and, on January 25, 2019, the regulated companies, IGCU and IGCE, appealed the decision before the Energy Government Secretariat (Secretar’a de Gobierno de Energía).
 
The 2016 Merger
 
On January 1, 2016, we merged with three holding companies: (i) SADESA, (ii) HNQ and (iii) OSA. The purpose of the merger was to reorganize and optimize our corporate structure. As a result of the merger, we reduced our share capital from Ps.199,742,158 to Ps.189,252,782. We refer to this merger as the 2016 Merger. Following the 2016 Merger, each of SADESA, HNQ and OSA were dissolved.
 
SADESA was a holding company with control over Central Puerto, HNQ and OSA that, prior to the 2016 Merger, held a 26.18% direct interest in Central Puerto, a 63.73% interest in HNQ, a 96.79% interest in OSA and a 5.10% direct interest in Proener S.A.U. HNQ was a holding company that prior to the 2016 Merger held a 17.74% interest in Central Puerto. OSA was a holding company that prior to the 2016 Merger held a 30.39% interest in Central Puerto, a 94.90% interest in Proener S.A.U. and a 20.00% interest in TGM. TGM is dedicated to the operation, maintenance and commercialization of an international gas pipeline between Argentina and Brazil.
 
La Plata Plant Sale
 
On December 20, 2017, YPF EE accepted our offer to sell the La Plata plant for a total sum of US$31.5 million (without VAT), subject to certain conditions. On February 8, 2018, after such conditions were met, the plant was transferred to YPF EE, including generation assets, personnel and agreements related to the operation and/or maintenance of the La Plata plant’s assets, with effective date January 5, 2018. Consequently, as of December 31, 2017, the La Plata plant was classified as a disposal group held for sale and its respective results were classified for the years ended December 31, 2018, 2017 and 2016 as discontinued operations. See“Item 5.A. Operating Results—Factors Affecting our Results of Operations—Sale of the La Plata Plant” and Note 21 to our audited consolidated financial statements.
 
The contract between us and Transportadora de Gas del Sur (“TGS”) for the natural gas transportation capacity has remained effective after the sale of the La Plata plant. Pursuant to the terms of our agreement with YPF, we resell our gas transportation capacity to YPF through the resale system established by Resolution ENARGAS 419/97. The resale under such system is open to third parties and consequentially does not ensure that YPF will receive the gas transportation capacity needed to operate the La Plata plant. Therefore, on January 25, 2018, we requested to be registered with the Ministry of Energy and the ENARGAS as a natural gas seller to permit the resale of our gas transportation capacity to YPF without the risk of intervention from interested third parties. On July 20, 2018, we were effectively registered as natural gas sellers.
 
Item 4.B 
Business overview
 
Overview
 
We are one of the largest private sector power generation companies in Argentina, as measured by generated power, according to data from CAMMESA. In the year ended December 31, 2018, we generated a total of 14,479 net GWh of power, representing approximately 17.00% of the power generated by private sector generation companies in the country during such period, according to data from CAMMESA. We had an installed generating capacity of 3,810 MW as of December 31, 2018. These figures exclude the La Plata plant which, effective as of January 5, 2018, we sold the La Plata plant to YPF EE. For further information, see “Item 4.A. History and development of the Company—La Plata Plant Sale”).
 
We have a generation asset portfolio that is geographically and technologically diversified. Our facilities are distributed across the City of Buenos Aires and the provinces of Buenos Aires, Córdoba, Mendoza, Neuquén and Río Negro. We use conventional and renewable technologies (including hydro power) to generate power, and our power generation assets include combined cycle, gas turbine, steam turbine, co-generation, hydroelectric, and wind turbines. 
 
The following table presents a brief description of the power plants we owned and operated as of December 31, 2018.
 
 
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Power plant
Location
Installed capacity (MW)
Technology
Puerto Nuevo(1)                                   
City of Buenos Aires
589
Steam turbines
Nuevo Puerto(1)                                   
City of Buenos Aires
360
Steam turbines
Puerto combined cycle(1)
City of Buenos Aires
765
Combined cycle
Luján de Cuyo plant                                   
Province of Mendoza
509
Steam turbines, gas turbines, two cycles and mini-hydro turbine generator, producing electric power and steam
Piedra del Aguila plant                                   
Piedra del Aguila (Limay River, bordering provinces of Neuquén and Río Negro)
1,440
Hydroelectric plant
La Castellana I wind farm(2)
Province of Buenos Aires
99
Wind turbines
Achiras I wind farm(2)                                   
Province of Córdoba
48
Wind turbines
Total
 
3,810 MW
 
_____________
(1) 
Part of the Puerto Complex as defined in Business.
(2) 
La Castellana I and Achiras I wind farms are owned by CP La Castellana S.A.U. and CP Achiras S.A.U., respectively, both of which are fully owned subsidiaries of CP Renovables S.A. As of the date of this annual report, we own a 70.19% interest in CP Renovables. See “Item 4.B. Business OverviewOur Subsidiaries”
 
In addition, we participate in an arrangement known as the FONINVEMEM, which is managed by CAMMESA at the instruction of the Ministry of Energy. The prior Argentine governments administration created the FONINVEMEM with the purpose of repaying power generation companies, like us, the existing receivables for electric power sales between 2004 and 2011 and funding the expansion and development of new power capacity.
 
As a result of our participation in this arrangement, we receive monthly payments for certain of our outstanding receivables with CAMMESA. In addition, we have an equity interest in the companies that operate the FONINVEMEMs new combined cycle projects, which will be entitled to take ownership of the combined cycle projects on a date ten years from the date of their initial operation. Under this arrangement, we began collecting our outstanding receivables from electric power sales from January 2004 through December 2007 from CAMMESA, denominated in U.S. dollars, over the ten-year period once the TJSM and TMB combined cycles became operational in March 2010.
 
In addition, effective as of March 20, 2018, CAMMESA granted the CVO Commercial Approval in the WEM of units TG11, TG12 and TV10, as a combined cycle of the thermal plant Central Vuelta de Obligado, located in the Province of Santa Fe, with an installed capacity of 816 MW of gross capacity and 778.884 MW of net power output to the grid. As a consequence of the CVO Commercial Approval and pursuant to the “Agreement for Project Management and Operation, Increase of Thermal Generation Availability and Adaptation of Remuneration for Generation 2008-2011” executed on November 25, 2010 among the Secretariat of Energy and Central Puerto along with other electric power generators (the “CVO Agreement”), we are entitled to collect LVFVD accrued between 2008 and September 2010, after adding the interest established by Art. 3 of Resolution SE 406/03 and converted into US dollars at the exchange rate of the date of the CVO Agreement. Pursuant to the Agreement for LVFVD during 2008-2011, this capital accrues interest, starting from the date of the CVO Agreement (i.e., November 25, 2010), at 30-day LIBOR plus 5.00%. Additionally, certain receivables that accrued after September 2010 and were also included in the CVO Agreement, accrue interest at 30-day LIBOR plus 5.00%, starting from the due date of each of these receivables.
 
The total estimated amount due to us under the CVO Agreement is US$548 million (including VAT), plus accrued interests after the CVO Commercial Approval, which will be collected in 120 equal, consecutive, monthly installments, starting from the date of CVO Commercial Approval, accruing interest at 30-day LIBOR plus 5.00% interest. As a result of the conversion of the LVFVD into US dollars detailed in the previous paragraph, we had a one-time income, before income tax, of Ps. 11,017 million, measured in current unit as of December 31, 2018 (or Ps. 7,959 million, measured in nominal terms), at an exchange rate of Ps. 20.17 to US$1.00, which was the spot bid exchange rate reported by the Banco de la Nación Argentina for wire transfers (divisas) as of March 20, 2018, which was recognized by us in the consolidated income statement for the year ended December 31, 2018) under “CVO receivable update”. See “Item 4.B. Business Overview—Our Competitive StrengthsStrong cash flow generation, supported by U.S. dollar denominated cash flows for more information on FONINVEMEM and on the Commercial Approval of the thermal plant Central Vuelta de Obligado.
 
Effective as of March 20, 2018, CAMMESA granted the CVO Commercial Approval in the WEM, as a combined cycle, of the thermal plant Central Vuelta de Obligado, which entitled us to receive the collection of the trade receivables under the CVO Agreement. A PPA between the CVO Trust and CAMMESA, through which the CVO Trust makes energy sales and, consequently, receives the cash flow to pay the trade receivables, had to be signed in order to start the collections.
 
The PPA agreement was signed on February 7, 2019, with retroactive effect to March 20, 2018.
 
As a result, the original amortization schedule from the CVO Agreement is in full force and effect.
 
The unpaid installments corresponding to the March-December 2018 period add up to US$ 78.15 million (including VAT, corresponding to installments 1 to 10). As of the day of this annual report, we continue in negotiations with CAMMESA to collect such unpaid amounts as soon as possible, plus the accrued interest between each due date and the effective payment date.
 
 
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Despite the referred unpaid installments, as of the date of this annual report, we received the payment related to January and February 2019 (corresponding to installments 11 and 12, respectively) pursuant to the CVO Agreement’s original disbursement schedule, at the exchange rate of the last date of each month, on its respective due dates, in March and April 2019, respectively.
 
We hold equity interests in the companies that operate the following FONINVEMEM thermal power plants:
 
Power plant
Location
Installed capacity (MW)
Technology
% Interest in the operating company(1)
San Martín                           
Timbues, Province of Santa Fe
865
Combined cycle plant, which became operational in 2010
30.8752%
Manuel Belgrano                            
Campana, Province of Buenos Aires
873
Combined cycle plant, which became operational in 2010
30.9464%
Vuelta de Obligado
Timbues, Province of Santa Fe
816
Combined cycle plant, which became operational in March 2018
56.1900%
_____________
(1) 
In each case, we are the private sector generator with the largest ownership stake. After ten years operating each company, all governmental entities that financed the constructions of such plants will be incorporated as shareholders of TJSM, TMB and CVOSA, our interests in TJSM, TMB and CVOSA will be significantly diluted. See “Item 3.D. Risk FactorsRisks Relating to Our BusinessOur interests in TJSM, TMB and CVOSA will be significantly diluted.
 
The following set of graphs shows our total assets under the FONINVEMEM program:
 
 
_____________
Enel includes Enel Generación Costanera S.A., Central Dock Sud S.A. and Enel Generación El Chocón S.A.
Source: TJSM, TMB and CVOSA
 
 
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The following graphic breaks down where our plants and power investments are located in Argentina and their installed capacity:
 
_____________
(1) 
Assets under construction/development refers to (a) the wind farms La Castellana II, La Genoveva II, Manque (previously a part of Achiras II), Los Olivos (previously a part of Achiras II) and La Genoveva I, which are under construction and are expected to be finished in the third quarter of 2019, fourth quarter of 2019, first quarter of 2020 and second quarter of 2020, respectively; (b) the Luján de Cuyo co-generation unit, which is under construction and is expected to be finished in the fourth quarter of 2019; (c) the Terminal 6 Plant, which is under construction and is expected to be finished in the second quarter of 2020; and (d) the solar farm El Puesto, which is under development and is expected to be finished in the third quarter of 2020.
(2) 
FONINVEMEM Plants refers to the plants José de San Martín, Manuel Belgrano and Vuelta de Obligado that we expect to be transferred from FONINVEMEM trusts to the operating companies, TJSM, TMB and CVOSA, respectively, after the first ten years of operation as a result of the FONINVEMEM program and other similar programs. For a description of when we expect this transfer to occur and other information, see “Item 4.B. Business OverviewFONINVEMEM and Similar Programs.
(3) 
The graphic excludes the La Plata plant which, effective as of January 5, 2018, we sold to YPF EE. For further information, see “Item 4.A. History and development of the Company—La Plata Plant Sale.”
(4) 
Power capacity numbers have been rounded. The power capacity with respect to the assets under construction/development is the awarded power capacity.
 
Note: Numbers in the map have been round-up.
 
In the year ended December 31, 2018, we had revenues for continuing operations of Ps.14.27 billion (or US$378 million).
 
In the year ended December 31, 2018, we sold approximately 97.68% of our electric energy sales (in MWh) under the Energía Base. Sales under Energía Base accounted for 73.06% of our revenues in the year ended December 31, 2018. In the year ended December 31, 2016, tariffs under the Energía Base were paid by CAMMESA based on a fixed and variable costs system which was determined by the former Secretariat of Electric Energy pursuant to Resolution SE No. 95/13, as amended. These tariffs were adjusted annually, denominated in pesos, and remained unchanged throughout the year. From February 2017 to February 2019, the Energía Base was regulated by Resolution SEE No. 19/17, which replaced Resolution SE No. 95/13, as amended. Resolution SEE No. 19/17 increased the Energía Bases tariffs and denominated them in U.S. dollars. Since March 2019, Energía Base has been regulated by Resolution SRRyME No. 1/19, which abrogated Resolution SE No. 19/17. Resolution SRRyME No. 1/19 decreased the tariffs for the energy and power. Under the Energía Base, the fuel required to produce the energy we generate is, generally, supplied by CAMMESA free of charge, and the price we receive as generators, for sales not made under term contracts, is determined by the Resolution SRRyME No. 1/19 without accounting for the fuel CAMMESA supplies. Our compensation under the Energía Base depends to a large extent on the availability and energy output of our plants, and in the case of the thermal units, the utilization factor of each machine.
 
 
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On November 7, 2018, pursuant to Res. SEE 70/18, the Argentine government authorized generators to purchase their own fuel for assets under the Energía Base Regulatory framework. If generation companies opt to take this option, CAMMESSA values and pays the generators their respective fuel costs in accordance with the Variable Costs of Production (CVP) declared by each generator to CAMMESA. The agency in charge of dispatch (Organismo Encargado del Despacho or “OED” using the Spanish acronym) -CAMMESA- will continue to supply the fuel for those generation companies that do not elect to take this option. In accordance to Res. SEE 70/18, in November 2018, we started purchasing fuel for our Luján de Cuyo combined cycle, and in December 2018, for all our thermal units. In the year ended December 31, 2018, income under Res. SEE 70/18 accounted for 13.63% of our revenues.
 
Additionally, we have sales under contracts, including (i) term market sales under contract, (ii) Energía Plus sales under contract; and (iii) sales of energy under the RenovAr Program. Term market sales under contract include sales of electric power under negotiated contracts with private and public sector counterparties such as YPF. Sales under contracts generally involve PPAs with customers and are contracted in U.S. dollars. The prices in these contracts include the price of fuel used for generation, the cost of which is assumed by the generator. For terms longer than one year, these contracts typically include electric power price updating mechanisms in the case of fuel price variations or the generator being required to use liquid fuels in the event of a shortage of natural gas. For more information regarding our main clients for term market sales under contract, see BusinessOur Customers. Term market sales under contract accounted for 0.32% of our electric power sales (in MWh) and 0.37% of our revenues for the year ended December 31, 2018. In our Luján de Cuyo plant, we are also permitted to sell a minor portion (up to 16 MW) of our generation capacity and electric power under negotiated contracts with private sector counterparties under the Energía Plus, to encourage private sector investments in new generation facilities. Energía Plus sales under contracts accounted for 0.48% of our electric power sales (in MWh) and 1.72% of our revenues for the year ended December 31, 2018. These contracts typically have one to two year terms, are denominated in U.S. dollars and are paid in pesos at the exchange rate as of the date of payment. Under the rules and regulations of the Energía Plus, the generator buys the fuel to cover the committed demand of electric power and supplies the electric power to large electric power consumers at market prices, denominated in U.S. dollars, previously agreed between the generator and its clients. Sales under RenovAr Program accounted for 1.52% of our electric power sales (in MWh) and 4.20% of our revenues for the year ended December 31, 2018. See “Item 4.B. Business Overview—The Argentine Electric Power Sector. We also received remuneration under Resolution No. 724/2008, relating to agreements with CAMMESA to improve existing power generation capacity, which is denominated in U.S. dollars and is paid in pesos at the exchange rate as of the date of payment. Revenues under Resolution No. 724/2008, accounted for 2.11% of our revenues for the year ended December 31, 2018. See “Item 5. Operating and Financial Review and ProspectsElectric Power Sold on the Spot Market.
 
We also produce steam. As of December 31, 2018 we had an installed capacity of 150 tons per hour. Steam sales accounted for 1.72% of our revenues for the year ended December 31, 2018. Our production of steam for the year ended December 31, 2018 was 1,103 thousand metric tons. Our Luján de Cuyo plant, supplies steam under negotiated contracts with YPF.
 
After the La Plata Plant Sale, the contract between us and TGS for the natural gas transportation capacity has remained effective. Pursuant to the terms of our agreement with YPF, we resell our gas transportation capacity to YPF through the resale system established by Resolution ENARGAS 419/97. The resale under such system is open to third parties and consequentially does not ensure that YPF will receive the gas transportation capacity needed to operate the La Plata plant. Therefore, on January 25, 2018, we requested to be registered with the Ministry of Energy and the ENARGAS as a natural gas seller to permit the resale of our gas transportation capacity to YPF without the risk of intervention from interested third parties. On July 20, 2018, we were effectively registered as natural gas sellers. The resell to YPF of our natural gas transportation capacity accounted for 1.36% of our revenues for the year ended December 31, 2018.
 
In addition, we have income derived from the operating fee that we receive for the management of the Central Vuelta de Obligado plant. The income from the management of the Central Vuelta de Obligado plant accounted for 1.83% of our revenues for the year ended December 31, 2018.
 
Our Luján de Cuyo plant has a combined heat and power (CHP) unit in place, which supplies 150 metric tons per hour of steam to YPFs refinery in Luján de Cuyo under a steam supply agreement. This contract is denominated and invoiced in U.S. dollars, but can be adjusted in the event of variations in U.S. dollar-denominated prices for fuel necessary for power generation. On February 8, 2018, we entered into an agreement to extend our steam supply agreement with YPF at our Luján de Cuyo plant for a period of up to 24 months from January 1, 2019 under the same terms as our existing steam supply agreement. On December 15, 2017, we also executed a new steam supply contract with YPF for a period of 15 years that will replace our existing contract with YPF and will begin when the new co-generation unit at our Luján de Cuyo plant begins operation, which is expected to occur in December 2019. For further information on the steam supply agreements with YPF for the Luján de Cuyo plant, see “Item 5.A. Operating Results—Factors Affecting Our Results of Operations—Sales Under Contracts, Steam Sales and Resale of Natural Gas Transportation Capacity —Steam supply to YPF—Luján de Cuyo plant”.
 
 
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The following graph breaks down our revenues from continuing operations in the year ended December 31, 2018 by regulatory framework:
 
 
 
Source: Central Puerto. (1) Includes (i) sales of energy and power to CAMMESA remunerated under Resolution No. 95 and Resolution No. 19/2017 (ii) sales of energy and power to CAMMESA not remunerated under Resolution No. 95, (iii) remuneration under Resolution No. 724/2008 relating to agreements with CAMMESA to improve existing Argentine power generation capacity and (iv) income related to Res. SEE 70/18 (see ““Item 4.B. Business Overview—The Argentine Electric Power SectorRemuneration SchemeThe Current Remuneration SchemeResolution SEE 70/18 - Option to purchase fuel for units under Energía Base Regulatory Framework.”). See “Item 4.B. Business Overview—The Argentine Electric Power SectorStructure of the IndustryShortages in the Stabilization Fund and Responses from the Argentine GovernmentThe National Program.
 
Note: As of March 1, 2019, a new remuneration scheme for Energía Base came into force with Resolution SRRyME No. 1/19. For more information see “Item 4.B. Business Overview—The Argentine Electric Power SectorRemuneration SchemeThe Current Remuneration Scheme.”
 
 
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The following graph breaks down our electric energy sales from continuing operations in the year ended December 31, 2018 by regulatory framework: 
 
 
Source: Central Puerto.
 
Note: As of March 1, 2019, a new remuneration scheme for Energía Base came into force with Resolution SRRyME No. 1/19. For more information see “Item 4.B. Business Overview—The Argentine Electric Power SectorRemuneration SchemeThe Current Remuneration Scheme.”
 
As of the date of this annual report, we have significant plans underway to expand our generating capacity through renewable energy projects, including our five wind energy projects with expected generating capacity of 86.60 MW (La Genoveva I), 15.75 MW (La Castellana II), 57 MW (Manque, previously part of Achiras II), 22.80 MW (Los Olivos, previously part of Achiras II) and 41.80 MW (La Genoveva II), and one solar project with an expected installed capacity of 12 MW (El Puesto). In 2016, we formed a subsidiary, CP Renovables S.A. (CP Renovables), to develop, construct and operate renewable energy generation projects. As of the date of this annual report, we own a 70.19% interest in CP Renovables. The remaining 29.81% interest is owned by Guillermo Pablo Reca.
 
In 2015 and 2016, we acquired four heavy-duty, highly efficient gas turbines: (i) one GE gas turbine with a capacity of 373 MW; (ii) two Siemens gas turbines, each with a capacity of 298 MW; and (iii) one Siemens gas turbine with a capacity of 286 MW, which we are currently installing in our Terminal 6 San Lorenzo co-generation project. Additionally, we have also acquired 130 hectares of land in the north of the Province of Buenos Aires, in a location that provides excellent conditions for fuel delivery and access to power transmission lines. In addition, as of the date of this annual report, we have already paid SEK$381.37 million (which, converted at the exchange rate quoted by the Central Bank as of the date of each payment, equals US$45.46 million) to purchase two additional Siemens gas turbines for our Luján de Cuyo project.
 
We also own long-term significant non-controlling investments in companies that have utility licenses to distribute natural gas through their networks in the provinces of Mendoza, San Juan, San Luis, Córdoba, Catamarca and La Rioja. Taking into account direct and indirect interests, we hold (i) a 22.49% equity stake in DGCU and (ii) a 39.69% equity stake in DGCE (Ecogas). Ecogas had a gas distribution network covering 31,637 km and served approximately 1,330,923 customers as of December 31, 2018. In the year ended December 31, 2018, Ecogas distributed an average of 13.80 million cubic meters of natural gas per day; and in 2017, Ecogas distributed an average of 14.21 million cubic meters of natural gas per day. This volume of distribution represented approximately 15.70% and 14.21% of the gas delivered by all the distribution companies in Argentina in 2018 and in 2017, respectively, according to data from Ecogas. In the year ended December 31, 2018 our interest in Ecogas produced Ps.1.01 billion in share of profit of an associate, which represented 5.88% of our net income for such period.
 
At a meeting of our shareholders on December 16, 2016, in accordance with the strategic objective of focusing on assets within the energy industry, the shareholders considered a potential sale of our equity interests in Ecogas to Magna Energía S.A. but voted to postpone the decision. We are currently assessing various strategic opportunities regarding DGCU and DGCE, including a possible partial or total sale of our equity interest in them. On January 26, 2018, the shareholders of DGCE approved the admission of DGCE to the public offering regime in Argentina. On March 14, 2018, the Company authorized the offer of up to 10,075,952 common class B shares of DGCE, in a potential public offering authorized by the CNV, subject to market conditions. This authorization was encompassed within February 23, 2018 authorization of the Board of Directors for the sale of up to 27,597,032 common B shares of DGCE. As of the date of this annual report, we continue to evaluate this strategy.
 
 
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Our Competitive Strengths
 
We believe that we have achieved a strong competitive position in the Argentine power generation sector primarily as a result of the following strengths:
 
● 
One of the largest private sector power companies in Argentina. We are one of the largest private sector power generation companies in Argentina, as measured by power generated, according to data from CAMMESA. In the year ended December 31, 2018, we generated a total of 14,479 net GWh of power for continuing operations and 10 net GWh of power from the discontinued operations of the La Plata plant (see “Item 4.A. History and development of the Company—La Plata plant Sale”). As of December 31, 2018, we had an installed generating capacity of 3,810 MW. Our leading position allows us to develop a range of sales and marketing strategies, without depending on any one market in particular. Additionally, our size within the Argentine market positions us well to take advantage of future developments as investments are made in the electric power generation sector. Our ample installed capacity is also an advantage, as we have sufficient capacity to support large, negotiated contracts.
 
The following graphs shows the SADIs total power generation by private companies and market share for 2018 (grouped by related companies and subsidiaries):
 
 
Source: CAMMESA. (i) Enel includes Enel Generación Costanera S.A., Central Dock Sud S.A. and Enel Generación El Chocón S.A.; (ii) Pampa Energía includes Central Térmica Güemes S.A., Central Térmica Loma la Lata S.A., Inversora Piedra Buena S.A., Inversora Diamante S.A., CTG and Inversora Nihuiles, and Petrobras Argentina S.A.; and (iii) AES Argentina Generación includes Central Térmica San Nicolás S.A. and Hidroeléctrica Alicurá S.A.
 
● 
High quality assets with strong operational performance. We have a variety of high quality power generation assets, including combined cycle turbines, gas turbines, steam turbines, hydroelectric technology and steam and power co-generation technology, with a combined installed generating capacity of 3,810 MW. Our efficiency levels compare favorably to those of our competitors due to our efficient technologies. The following chart shows the efficiency level for the period between November 2018 and April 2019 of each of our generating units compared to our main competitors based on heat rate, which is the amount of energy used by an electric power generator or power plant to generate one kWh of electric power.
 
 
 
49
 
 
 
 
 
Source: CAMMESA.
 
The following chart shows the availability ratio of our thermal assets as compared to the market average: 
 
 
Source: Central Puerto, CAMMESA. 1Average market availability for thermal units, excluding the La Plata plant thermal units (see “Item 4.A. History and development of the Company—La Plata Plant Sale”).
 
We have long-term maintenance contracts with the manufacturers of our combined cycle units and co-generation plants with the largest capacity, namely the Puerto combined cycle unit (CEPUCC) and the LDCUDCC25 combined cycle unit at the Luján de Cuyo plant and the co-generation units at the Luján de Cuyo plant (LDCUTG23 and LDCUTG24), under which the manufacturers provide maintenance using best practices recommended for such units. Our remaining units receive maintenance through our highly trained and experienced personnel, who strictly follow the recommendations and best practice established by the manufacturers of such units. We are also capable of generating power from several sources of fuel, including natural gas, diesel oil and fuel oil. In addition, in recent years we have invested in adapting our facilities to be able to generate power from biofuels, and we have developed business relationships over the years with strategic companies from the oil and gas and the biofuel sectors. Our power generation units are also favorably positioned along the systems power dispatch curve (the WEM marginal cost curve) as a result of our technologically diverse power generation assets and high level of efficiency in terms of fuel consumption, which ensures ample dispatch of energy to the system, even when taking into account new capacity additions expected in the coming years that were awarded pursuant to auctions to increase thermal generation capacity and capacity from renewable energy sources.
 
● 
Diversified and strategically located power sector assets. Our business is both geographically and technologically diverse. Our assets are critical to the Argentine electric power network due to the flexibility provided by the large fuel storage capacity, that allows us to store 32,000 tons of fuel oil (enough to cover 6.3 days of consumption) and 20,000 tons of gas oil (enough to cover 5.7 days of consumption) at our thermal generation plants, in addition to our access to deep water docks, our dam water capacity and our ability to store energy for 45 days operating at full capacity at Piedra del Águila. The prices for power transmission are regulated and based on the distance from the generating company to the user, among other factors. In this regard, our thermal power plants are strategically located in important city centers or near some of the systems largest customers, which constitutes a significant competitive advantage. For example, approximately 38% of Argentine energy consumption was concentrated within the metropolitan area of Buenos Aires during 2018. Because the lack of capacity in SADI limits the efficient distribution of energy generated in other geographic areas, our generation plants in Buenos Aires and Mendoza are essential to the supply of energy to meet the high demand in these areas. In addition, this need to generate energy close to a high consumption area in Argentina means that our plants are less affected by the installation of new capacity in other regions.
 
 
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The diversification of our fuel sources enables us to generate energy in different contexts, as shown in the following chart: 
 
 
 
 
Source: Central Puerto
_____________
(1) 
Excludes thermal generation from the La Plata plant (see “Item 4.A. History and development of the Company—La Plata Plant Sale”).
(2) 
Lujan de Cuyo’s Siemens Combined Cycle unit (306 MW installed capacity) is CEPU’s only unit relying exclusively on natural gas.
● 
Attractive growth pipeline. We have identified opportunities to improve our strategic position as a leader among conventional power generation technologies by expanding our thermal generation and renewable energy capacity.
 
Thermal Generation. In 2015 and 2016, we acquired four heavy-duty, highly efficient gas turbines: (i) one GE gas turbine with a capacity of 373 MW; (ii) two Siemens gas turbines, each with a capacity of 298 MW; and (iii) one Siemens gas turbine with a capacity of 286 MW. We also acquired 130 hectares of land in the north of the Province of Buenos Aires, which we believe will allow us to develop new projects that could add 1,255 MW to our total installed capacity under a simple cycle configuration or through combined cycle operations. For example, we are currently using a Siemens gas turbine, with a capacity of 286 MW, for the Terminal 6 San Lorenzo co-generation project. Our objective is to use the remaining three units and the aforementioned land, in which we have already invested US$134 million, to install new generation capacity, through one or more potential future projects. In addition, as of the date of this annual report, we have already paid SEK$381.37 million (which, converted at the exchange rate quoted by the Central Bank as of the date of each payment, equals US$45.46 million) to purchase two additional Siemens gas turbines for our Luján de Cuyo project.
 
Regarding the financing of the thermal project Luján de Cuyo, on March 26, 2019, the Company, as borrower, entered into a loan agreement with KfW for an amount of US $ 56,000,000 to finance the acquisition of the two Siemens SGT-800 gas turbines referenced above (with a power of 89 MW) and equipment from Siemens Sweden and related services from Siemens Argentina (for more information see “Item 4. Information of the Company—Recent Developments—Borrowing from KFW.”) As of the date of this annual report, we are working to satisfy all the conditions prior to the disbursement of this loan.
 
The Secretariat of Electric Energy, pursuant to Resolution SEE No. 287-E/17, called for proposals for supply of electric power to be generated through existing units, the conversion of open combined cycle units into closed combined cycle units or the installation of co-generation units. We submitted bids on August 9, 2017, and, on September 25, 2017, we were awarded two co-generation projects at Terminal 6 San Lorenzo (with an awarded electric capacity of 330 MW and 317 MW for the winter and summer, respectively) and Luján de Cuyo (with an awarded electric capacity of 93 MW and 89 MW for the winter and summer, respectively).
 
 
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We are evaluating additional projects for future bidding processes the Argentine government may launch in connection with the other categories set forth in Resolution SEE No. 420-E/16. After the previous two bidding processes of Resolution SEE 21/16 and Resolution SEE 287/17, the Argentine government awarded projects with an awarded capacity of 2.9 GW and 1.8 GW, respectively.
 
Renewable Generation. In addition, we are developing five wind energy projects and one solar energy project in Argentina with the following characteristics (the “Renewable Projects”):
 
 
La Genoveva I
La Castellana II
Manque (previously part of Achiras II)
Los Olivos (previously part of Achiras II)
La Genoveva II
El Puesto
Location 
Province of Buenos Aires
Province of Buenos Aires
Province of Córdoba
Province of Córdoba
Province of Buenos Aires
Province of Catamarca
Expected commercial operation date
May 2020 (1)
July 2019
January 2020
January 2020
August 2019
August 2020
Estimated total capital expenditure (excluding VAT) (2)
US$110 million
US$16 million
US$64 million
US$25 million
US$46 million
US$11 million
Awarded electric capacity 
86.60 MW
15.75 MW
57.00 MW
22.80 MW
41.80 MW
12 MW
Regulatory Framework 
RenovAr 2.0
MATER
MATER
MATER
MATER
MATER
Awarded price per MWh 
US$40.90
N/A
N/A
N/A
N/A
N/A
Contract length 
20 years, starting from commercial operation
N/A
N/A
N/A
N/A
N/A
Power purchase agreement signing date
July 2018
N/A
N/A
N/A
N/A
N/A
Number of units 
21 wind turbines
4 wind turbines
15 wind turbines
6 wind turbines
11 wind turbines
43,000 solar modules(3)
Wind turbine provider 
Vestas
Vestas
Vestas
Vestas
Vestas
To be defined
_____________
(1) 
The commercial operation date (COD) committed with CAMMESA of La Genoveva I is 720 days after the PPA signing date, which was on July 27, 2018.
(2) 
As of December 31, 2018, the executed capital expenditures for La Genoveva I, La Castellana II, Achiras II (which after December 31, 2018, was separated into Manque and Los Olivos projects), La Genoveva II and El Puesto were Ps. 604.42 million, Ps. 410.68 million, Ps. 426.79 million, Ps. 1,110.13 million, Ps. 12.71 million, respectively, in each case, plus the applicable value added tax.
(3) 
Estimated amount of modules.
 
Other than the Borrowing from KFW described in this annual report (see “Item 4.B. Information of the Company—Recent Developments—Borrowing from KFW”), our expansion projects are being developed with equity from Central Puerto and its subsidiaries. However, we may explore alternative financing options if the conditions are favorable.
 
In connection with the Renewable Projects, we have already obtained energy production assessments prepared by an independent expert, regulatory approvals of the environmental impact studies, relevant municipal qualifications and regulatory approvals of the electrical studies in connection with access to the transmission network. In addition, we have three usufructs over the land in the Province of Buenos Aires to be used for our La Castellana II, La Genoveva I and La Genoveva II projects and in the Province of Catamarca for the El Puesto project, and we own the necessary land in the Province of Córdoba to be used for our Manque and Los Olivos projects, which together were previously known as Achiras II project. We have begun construction of the facilities and have executed contracts with suppliers to acquire and maintain the wind turbines and solar panels of the Renewable Projects.
 
In connection with our renewable energy efforts, Law No. 27,191, provides that Large Users, whose demand exceeds 300 KW of average annual power, should comply with the obligation to purchase renewable energy by entering into a contract with a generating company or through self-generation. The Ministry of Energy and Mining through Resolution 281-E/ 2017, established the regulatory framework that allows Large Users to purchase renewable energy from private generating companies and the conditions for granting the dispatch priority that allows such transactions to take place and ensures that the private generating companies will not be restricted in the future in its generation dispatch (see “Item 4.B. Business Overview—The Argentine Electric Power SectorResolution No. 281-E/17: The Renewable Energy Term Market in Argentina). As of the date of this annual report, we have already signed long-term PPA contracts with private customers for 61% of the estimated energy generation capacity of our term market projects (considering the median -Percentile 50%- of the expected energy production) developed under Resolution No. 281-E/17 regulatory framework, which are currently under construction.
 
 However, we cannot assure you that the Argentine government will open new auction processes, or our bids will be successful or that we will be able to enter into PPAs in the future. See “Item 3D. Risk FactorsRisks Relating to our BusinessFactors beyond our control may affect our ability to win public bids for new generation capacity, or affect or delay the completion of new power plants once we have been awarded projects.
 
 
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Strong cash flow generation, supported by U.S. dollar denominated cash flows. We have strong, stable cash flows, mainly through payments we receive from CAMMESA, primarily as a result of the power generation remuneration structure in Argentina. Such payments principally depend on two factors: (i) the availability of power capacity and (ii) the amount of power generated. Both variables have been relatively stable in recent years, as a result of the diversified technology and high efficiency of our power generation units. Certain of these cash flows were previously denominated and paid by CAMMESA in Argentine pesos. However, after February 2017, under Resolution SEE No. 19/17, payments under the Energía Base are denominated in U.S. dollars but paid in pesos. Resolution SRRyME No. 1/19, in force since March 1, 2019, abrogated Resolution SEE No. 19/17 and replaced the regime set forth in this last resolution, and provided that while payments are denominated in U$S, they will be made in Argentine pesos. Although Resolution SRRyME 1/19 reduced the prices for energy and power for the thermal units under Energía Base regulatory framework, we believe that, in terms of revenues, the income from our new projects will offset the tariff decrease. In addition, our cash flows have little exposure to the fuel price changes as the fuel needed to produce the energy under the Energía Base is supplied by CAMMESA without charge or offset in the revenues we receive, and our term market sales under contracts typically include price adjustment mechanisms based on fuel price variations. In addition to these payments, our cash flow is supported by the U.S. dollar-denominated payments we receive from CAMMESA, related to our credits pursuant to the San Martín and Manuel Belgrano FONINVEMEM arrangements, which began in March 2010 and are expected to continue until March 2020. During the year ended December 31, 2018, we received Ps.515.26 million (US$ 19.81 million in U.S. dollar-denominated payments) in principal and Ps.33.14 million (US$ 1.31 million in U.S. dollar-denominated payments) in interest for these receivables (including VAT).
 
As of March 20, 2018, CAMMESA granted the CVO Commercial Approval in the WEM, as a combined cycle, of the thermal plant Central Vuelta de Obligado, which entitled us to receive the collection of the trade receivables under the CVO Agreement. A PPA between the CVO Trust and CAMMESA, through which the CVO Trust makes energy sales and, consequently, receives the cash flow to pay the trade receivables, had to be signed in order to start the collections.
 
The PPA agreement was signed on February 7, 2019, with retroactive effect to March 20, 2018.
 
As a result, the original amortization schedule from the CVO Agreement is in full force and effect.
 
The unpaid installments corresponding to the March-December 2018 period add up to US$ 78.15 million (including VAT, corresponding to installments 1 to 10). As of the day of this annual report, we continue in negotiations with CAMMESA to collect such unpaid amounts as soon as possible, plus the accrued interest between each due date and the effective payment date.
 
Despite the referred unpaid installments, as of the date of this annual report, we received the payment related to January and February 2019 (corresponding to installments 11 and 12, respectively) pursuant to the CVO Agreement’s original disbursement schedule, at the exchange rate of the last date of each month, on its respective due dates, in March and April 2019, respectively.
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Strong financial position and ample room for additional leverage. We benefit from a strong financial position, operating efficiency and a low level of indebtedness, allowing us to deliver on our business growth strategy and create value for our shareholders. In terms of our financial position, our total cash and cash equivalents and current other financial assets was Ps. 2.20 billion (US$58 million) as of December 31, 2018. As of the date of this annual report, we also have uncommitted lines of credit with commercial banks, totaling approximately Ps. 5.91 billion.
 
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Solid and experienced management team with a successful track record in delivering growth. Our executive officers have vast experience and a long track record in corporate management with, on average, 18 years of experience in the industry. Our management has diverse experience navigating different business cycles, markets and sectors, as evidenced by the growth and expansion we have undergone since the early 1990s. They also have a proven track record in acquisitions and accessing financial markets. For example, in 2007, HPDA successfully issued bonds in an aggregate principal amount of US$100 million, which were paid in full in 2016. In addition, in 2015, jointly with an investment consortium, we acquired non-controlling equity interests in Ecogas, which distributes natural gas through its network covering 31,637 km and serving approximately 1,330,923 customers as of December 31, 2018, further diversifying our interest in the sector. We believe that our management team has been successful in identifying attractive investment opportunities, structuring innovative business plans and completing complex transactions efficiently.
 
 
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Our management has significant in-country know-how, with professionals who have taken an active role in project development and construction, developing private and public investment plans with both Argentine and international partners. In addition, our management team has business experience at the international and national level, are familiar with the operation of our assets in a constantly-changing business environment and are strongly committed to our day-to-day decision-making process.
 
Finally, our executive officers have a solid understanding of Argentinas historically volatile business environment. They have built and maintained mutually beneficial and long-lasting relationships with a diversified group of suppliers and customers, and have cultivated relationships with regulatory authorities.
 
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Strong corporate governance. We have adopted a corporate governance code to put into effect corporate governance best practices, which are based on strict standards regarding transparency, efficiency, ethics, investor protection and equal treatment of investors. The corporate governance code follows the guidelines established by the CNV. We have also adopted a code of ethics and an internal conduct code designed to establish guidelines with respect to professional conduct, morals and employee performance. In addition, the majority of our Board of Directors qualifies as independent in accordance with the criteria established by the CNV, which may differ from the independence criteria of the NYSE and NASDAQ.
 
Our Business Strategy
 
We seek to consolidate and grow our position in the Argentine energy industry by maintaining our existing asset base and by acquiring and developing new assets related to the sector. The key components of our strategy are as follows:
 
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Capitalizing on expected growth initiatives while leveraging opportunities in an improved regulatory environment. Historically, Argentine regulations in the energy generation sector have hindered growth in the sector. Investment in the Argentine power and energy sector has been low since the 2001-2002 economic crisis in Argentina and the resulting regulatory changes in 2002 wherein the Argentine government set power generation tariffs in pesos and capped energy generation, transportation and distribution tariffs, which resulted in a steady decrease of the U.S. dollar value of these tariffs in subsequent years. Since the Macri administration assumed office, it has significantly curtailed currency controls and import-export taxes, and demonstrated a willingness to adjust tariffs applicable to power distributors, generators and transporters. As a response to the current electric power shortage, the Argentine government has declared a state of emergency for the national power system, has opened auction processes for the acquisition of power from renewable energy and the increase thermal generation capacity. In addition, the Argentine government has set forth overall guidelines for the development of energy projects, the procedures for compliance with energy goals and bids for thermal generation capacity and associated power generation to meet energy demand requirements in Argentina through 2018. For information about the call for bids, see the discussion of Resolution SEE No. 21/16, Resolution SEE No. 71/16 (complemented by Resolution No. 136/16 of the Ministry of Energy) and Resolution SEE No. 287-E/17 in “Item 4.B. Business Overview—The Argentine Electric Power Sector. We expect investment in the power generation sector to grow as a result of these reforms. We believe we are well-positioned to capitalize on the Argentine governments focus on expanding generation capacity, given our strong track record and competitive advantages, including our low level of indebtedness and technologically diverse and highly efficient power generation assets. In this respect, we plan to expand our generation capacity from thermal and renewable sources. As an example, we have acquired 130 hectares of land in the north of the Province of Buenos Aires near the Parana River and have purchased four thermal generation units with the intention of expanding our current generating capacity, one of which will be used for the Terminal 6 San Lorenzo thermal project. We intend to present a bid for new thermal generation capacity, through one or more projects, in future bidding processes, and we continue to analyze other project and investment opportunities in the sector.
 
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Consolidating our leading position in the energy sector. We seek to consolidate our position in the energy sector by analyzing value-generating alternatives through investments with a balanced approach to profitability and risk exposure. We are committed to maintaining our high operating standards and availability levels. To this end, we follow a strict maintenance strategy for our units based on recommendations from their manufacturers, and we perform periodic preventative and predictive maintenance tasks. We plan to focus our efforts on optimizing our current resources from a business, administrative and technological perspective, in addition to capitalizing on operating synergies from future businesses that rely on similar systems, know-how, customers and suppliers.
 
 
 
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Becoming a leading company in renewable energy in Argentina. Several research studies from organizations such as the Cámara Argentina de Energías Renovables suggest that Argentina has a significant potential in renewable energy (mainly in wind and solar energy). We also believe that renewable energy will become a larger part of the installed capacity in Argentina. The Ministry of Energy and Mining, through Law No. 27,191, has established a target for renewable energy sources to account for 20% of Argentinas electric power consumption by December 31, 2025. We intend to capitalize on this opportunity by expanding our investments into renewable energy generation. In order to achieve this goal, we are strengthening our renewable energy portfolio. In August 2018 and September 2018 our wind farms La Castellana I and Achiras I started operations. Additionally, we are also expanding our portfolio to five wind energy projects (La Castellana II, Manque and Los Olivos (which together were previously known as Achiras II), La Genoveva I and La Genoveva II) and one solar project (El Puesto) that are expected to increase our generating capacity by 15.75 MW, 57 MW, 22.8 MW, 86.6 MW, 41.8 MW and 12 MW, respectively, and exploring several other options to diversify our generation assets to include sustainable power generation sources. In 2016, we formed our subsidiary, CP Renovables, to develop, construct and operate renewable energy generation projects.
 
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Maintaining a strong financial position and sound cash flow levels. We have a low level of debt, which reflects our strong financial position and additional debt capacity. We believe our strong financial position is the result of our responsible financial policies and stable cash flows. We seek to preserve our current cash flow levels in the coming years by, among other things, keeping a rigorous maintenance program for our production units, which we expect will help us continue the positive operational results we have experienced, particularly with regard to our electric power dispatch availability. We intend to fund our expansion plans primarily with loan arrangements, such as credit facilities and project financing in the case of our renewable energy projects. Each of CP La Castellana and CP Achiras entered into loans to fund the development of renewable energy projects they were awarded and to purchase wind turbines. Additionally, we hope that the expected new capacity from these projects will allow us to further increase our cash flow, while enhancing our financial position.
 
Our Subsidiaries
 
Central Vuelta de Obligado S.A.
 
CVOSA is a private, unlisted company, engaged in managing the purchase of equipment and building, operating and maintaining the CVOSA power plant that is being constructed under a program substantially similar to the FONINVEMEM program. In the year ended December 31, 2018, CVOSA accounted for 56.19 % of our net income.
 
We have 56.19 % of the voting rights in CVOSA, which grants us the power to unilaterally approve resolutions for which a majority is required at the relevant shareholders meeting. However, pursuant to a shareholders agreement entered into among Endesa Costanera S.A., Hidroeléctrica El Chocon S.A., Central Dock Sud S.A. (the Other CVOSA Shareholders) and us, we will only be able to approve the following decisions with the affirmative vote of the Other CVOSA Shareholders: (i) entering into a merger, spin-off, transformation or liquidation; (ii) increasing or decreasing the capital stock; (iii) receiving capital contributions; (iv) entering into transactions with related parties; (v) amending the bylaws; (vi) entering into an operating and maintenance agreement for the Vuelta de Obligado power plant; (vii) approving the trust agreement in connection with the Vuelta de Obligado power plant and its amendments; (viii) filing any lawsuit against any governmental authorities, CAMMESA and/or the FONINVEMEM trust fund currently holding the Vuelta de Obligado power plant; (ix) entering into engineering services, gas supply and transportation agreements; and (x) entering into a power purchase agreement with CAMMESA for the Vuelta de Obligado power plant. If such decisions are to be decided at a board of directors meeting, they can only be approved with the affirmative vote of at least one member of the board of directors appointed by the Other CVOSA Shareholders.
 
The board of directors of CVOSA consists of four members, two of which are appointed by us and the remaining two, by the Other CVOSA Shareholders. In addition, we have the right to appoint the chairman of the board of directors of CVOSA, who has double vote in case of a tie. In addition, we have the right to appoint one member of the supervisory committee of CVOSA.
 
Pursuant to the terms of the FONINVEMEM agreement relating to the Vuelta de Obligado power plant, on the tenth anniversary of the start of operations of the Vuelta de Obligado power plant, which occurred on March 20, 2018, all governmental entities that financed the construction of the Vuelta de Obligado power plant have the right to be incorporated as shareholders of CVOSA, which in turn may dilute our interest in CVOSA. See “Item 3.D. Risk FactorsRisks Relating to Our BusinessOur interests in TJSM, TMB and CVOSA will be significantly diluted. If such dilution were to occur, we may no longer control CVOSA.
 
Proener S.A.U.
 
Proener S.A.U. is a private, unlisted company. We hold a 100.00% interest in Proener S.A.U., a company engaged in the commercialization and transportation of fuels, both domestically in Argentina and internationally, and providing consulting and technical assistance services to the energy industry. In the year ended December 31, 2018, Proener S.A.U. accounted for a loss equaling 0.04 % of our net income.
 
 
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Central Aimé Painé S.A.
 
Central Aimé Painé S.A. is a private, unlisted company. We hold a 97.00% interest in Central Aimé Painé S.A., a company engaged in managing the purchase of equipment and building, operating, and maintaining power plants, both domestically in Argentina and internationally. In the year ended December 31, 2018, Central Aimé Painé S.A. did not account for any of our net income.
 
CP Renovables S.A.
 
CP Renovables S.A. is a private, unlisted company, in which we hold a 70.19% interest in the capital stock. CP Renovables S.A. invests in renewable energy assets. In the year ended December 31, 2018, CP Renovables S.A. accounted for a loss, without taking into account the results of its subsidiaries, mainly CP Achiras and CP La Castellana, equaling 0.13% of our net income.
 
On January 18, 2017, we entered into a shareholders agreement with the minority shareholder of CP Renovables, Guillermo Pablo Reca. The shareholders agreement was amended and restated on November 28, 2018. For further information, see Item 7.B. Related Party TransactionsCP Renovables Shareholders Agreement.
 
CP Achiras S.A.U.
 
CP Achiras S.A.U. is a private, unlisted company. CP Renovables S.A. holds a 100% interest in the capital stock of CP Achiras S.A.U., a company engaged in the generation and commercialization of electric power through renewable sources. In the year ended December 31, 2018, CP Achiras accounted for a loss equaling 1.56% of our net income.
 
CPR Energy Solutions S.A.U. (previously known as “CP Achiras II S.A.U.”)
 
CPR Energy Solutions S.A.U. is a private, unlisted company. CP Renovables holds a 100% interest in the capital stock of CPR Energy Solutions S.A.U., a company engaged in generation and commercialization of electric power through renewable sources. In the year ended December 31, 2018, CPR Energy Solutions S.A.U. did not account for any of our net income.
 
CP Patagones S.A.U.
 
CP Patagones S.A.U. is a private, unlisted company. CP Renovables holds a 100% interest in the capital stock of CP Patagones S.A.U., a company engaged in generation and commercialization of electric power through renewable sources. In the year ended December 31, 2018, CP Patagones S.A.U. did not account for any of our net income.
 
CP La Castellana S.A.U.
 
CP La Castellana is a private, unlisted company. CP Renovables holds a 100% interest in the capital stock of CP La Castellana, a company engaged in generation and commercialization of electric power through renewable sources. In the year ended December 31, 2018, CP La Castellana accounted for a loss equaling 3.30% of our net income.
 
Parques Eólicos Australes S.A.
 
Parques Eólicos Australes S.A. is a private, unlisted company. CP Renovables holds a 99% interest in the capital stock of Parques Eólicos Australes S.A., a company engaged in the generation and commercialization of electric power through renewable sources. This entity is currently undergoing a liquidation process due to the lack of operations. In the year ended December 31, 2018, Parques Eólicos Australes S.A. did not account for any of our net income.
 
Vientos La Genoveva S.A.U.
 
Vientos La Genoveva S.A.U. is a private, unlisted company. On March 7, 2018, our subsidiary CP Renovables S.A. acquired 100% of the equity interests in Vientos La Genoveva S.A. and, on that same date, transformed it into a S.A.U. On August 6, 2018, we purchased from our subsidiary, CP Renovables S.A., 100% of the equity interests in Vientos La Genoveva S.A.U. Vientos La Genoveva is a company engaged in generation and commercialization of electric power through renewable sources. In the year ended December 31, 2018, Vientos La Genoveva accounted for a loss equaling 0.25% of our net income.
 
 
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Vientos La Genoveva II S.A.U.
 
Vientos La Genoveva II S.A.U. is a private, unlisted company. On June 28, 2018, our subsidiary CP Renovables S.A. acquired 100% of the equity interests in Vientos La Genoveva II S.A. and, and was later transformed it into a S.A.U. On August 6, 2018, we purchased from our subsidiary, CP Renovables S.A., 100% of the equity interests in Vientos La Genoveva II S.A.U. In the year ended December 31, 2018, Vientos La Genoveva accounted for a loss equaling 0.83% of our net income.
 
CP Manque S.A.U.
 
CP Manque S.A.U. is a private, unlisted company. CP Renovables holds a 100% interest in the capital stock of CP Manque S.A.U., a company engaged in generation and commercialization of electric power through renewable sources. In the year ended December 31, 2018, CP Manque S.A.U. did not account for any of our net income.
 
CP Los Olivos S.A.U.
 
CP Los Olivos S.A.U. is a private, unlisted company. CP Renovables holds a 100% interest in the capital stock of CP Los Olivos S.A.U., a company engaged in generation and commercialization of electric power through renewable sources. In the year ended December 31, 2018, CP Los Olivos S.A.U. did not account for any of our net income.
 
Our Affiliates
 
Termoeléctrica José de San Martín S.A. (TJSM) and Termoeléctrica Manuel Belgrano S.A. (TMB)
 
TJSM and TMB are private, unlisted companies, which are engaged in managing the purchase of equipment, and building, operating and maintaining the San Martín and Belgrano power plants, respectively, each constructed under the FONINVEMEM program. In the year ended December 31, 2018, TJSM and TMB accounted for 0.20% and 0.17% of our net income, respectively.
 
We have 30.8752% of the voting rights in TJSM and 30.9464% of the voting rights in TMB. While we do not have control over these companies, pursuant to a shareholders agreement entered into among Endesa Costanera S.A., Hidroeléctrica El Chocón S.A. Central Dock Sud S.A, AES Argentina Generación S.A., Central Dique S.A. and us, certain material actions can only be approved with our affirmative vote, such as, among others, entering into power purchase agreements with CAMMESA, engineering services agreements, gas supply and transportation agreements, and transactions with related parties.
 
The board of directors of each of TJSM and TMB consists of nine members, two of which are appointed by us. In addition, we have the right to appoint one alternate member of the supervisory committee of each company.
 
Pursuant to the terms of the FONINVEMEM agreements relating to the San Martín and Belgrano power plants, on the tenth anniversary of the start of operations of each of the San Martín and Belgrano power plants, all governmental entities that financed the construction of the San Martín and Belgrano power plants, respectively, have the right to be incorporated as shareholders of TJSM or TMB, as applicable, which in turn may dilute our interest in TJSM and TMB. See “Item 3.D. Risk FactorsRisks Relating to Our BusinessOur interests in TJSM, TMB and CVOSA will be significantly diluted. If such dilution were to occur, we may no longer have veto rights or the right to appoint any members of the board of directors and supervisory committee pursuant to the terms of the TJSM and TMB shareholders agreements.
 
In addition, the bylaws of TJSM and TMB provide that shareholders of such companies (including the Argentine government once it becomes a shareholder to TJSM and TMB) have a right of first refusal in connection with any transfer of shares other than to persons controlled by, or controlling, such shareholders. The right of first refusal shall not be applicable upon the transfer of shares to the Argentine government, pursuant to the San Martín and Manuel Belgrano FONINVEMEM arrangements (See “Item 4.B. Business OverviewFONINVEMEM and Similar Programs.