genneia s.a
TRANSCRIPT
GENNEIA S.A.
Consolidated Financial Statements as of December 31, 2013, 2012 and 2011
Report of Independent Public Accountants
GENNEIA S.A.
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2013, 2012 AND 2011
Index
- Consolidated balance sheets 1
- Consolidated statements of profit and loss and other comprehensive income 2
- Consolidated statements of changes in shareholders’ equity 3
- Consolidated statements of cash flow 4
- Notes to the consolidated financial statements:
1. Background and business of the Company 5
2. Basis of preparation of the consolidated financial statements 6
3. Summary of significant accounting policies 8
4. Critical judgments in applying accounting policies 15
5. Detail of the main accounts of the consolidated financial statements 16
6. Balances and transactions with related parties 28
7. Financial instruments 30
8. Capital stock 33
9. Financing 34
10. Operating leases 38
11. Key management compensation 38
12. Major contingencies, claims, contractual commitments and other relevant agreements 38
13. Regulatory framework 44
14. Consolidated business segment information 45
15. Subsequent events 46
16. Approval of the consolidated financial statements 46
1
GENNEIA S.A.
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2013, 2012 AND 2011
(amounts expressed in thousands of Argentine pesos - Note 3.1)
2013 2012 2011
Current Assets
Cash (Note 5.a) 31,591 11,924 19,671
Investments (Note 5.b) 113,767 708 23,117
Trade receivables (Note 5.c) 476,927 313,871 207,366
Other receivables (Note 5.d) 51,466 92,467 75,702
Inventories (Note 5.e) 1,799 9,846 7,823
Other assets - - 2,006
Subtotal current assets 675,550 428,816 335,685
Assets classified as held for sale (Note 5.h) - 8,655 -
Total current assets 675,550 437,471 335,685
Non-current assets
Trade receivables (Note 5.c) 3,790 3,790 7,168
Other receivables (Note 5.d) 162,498 109,450 76,194
Inventories (Note 5.e) 31,978 18,855 5,227
Fixed assets (Note 5.f) 2,315,041 1,448,107 1,425,301
Assets under concession (Note 5.f) 20,481 23,333 19,863
Intangible assets (Note 5.f) 30,375 31,675 -
Other assets (Note 5.g) - 214 33
Total non-currents assets 2,564,163 1,635,424 1,533,786
Total assets 3,239,713 2,072,895 1,869,471
Current liabilities
Accounts payable (Note 5.i) 519,834 285,601 276,336
Loans (Note 5.j) 364,045 283,733 234,362
Salaries and social security payable (Note 5.k) 22,309 15,817 12,670
Taxes payable (Note 5.l) 32,182 14,034 7,812
Other liabilities (Note 5.ll) 18,197 18,834 15,338
Provisions (Note 5.m) 1,900 1,900 1,538
Subtotal current liabilities 958,467 619,919 548,056
Liabilities related to assets classified as held for sale (Note 5.h) - 4,772 -
Total current liabilities 958,467 624,691 548,056
Non-current liabilities
Accounts payable - 95 104
Loans (Note 5.j) 1,648,580 897,382 885,376
Taxes payable (Note 5.l) 815 1,665 1,923
Deferred income tax liability (Note 5.r) 124,454 60,227 25,491
Other liabilities - - 3,480
Total non-current liabilities 1,773,849 959,369 916,374
Total liabilities 2,732,316 1,584,060 1,464,430
Shareholders’ equity (per corresponding statements)
Attributable to owners of the Company 507,397 488,835 405,041
Attributable to non-controlling interests - - -
Total shareholders’ equity 507,397 488,835 405,041
Total liabilities and shareholders’ equity 3,239,713 2,072,895 1,869,471
Notes 1 to 16 are an integral part of and should be read in conjunction with these consolidated financial statements.
2
GENNEIA S.A.
CONSOLIDATED STATEMENTS OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(amounts expressed in thousands of Argentine pesos - Note 3.1)
2013 2012 2011
Continuing operations
Net sales (Note 5.n) 922,624 743,800 557,899
Cost of sales (Note 5.ñ) (579,339) (483,027) (384,307)
Gross profit 343,285 260,773 173,592
Selling expenses (Note 5.o) (8,748) (11,969) (5,330)
Administrative expenses (Notes 5.o) (81,047) (77,168) (54,406)
Other expenses, net (Note 5.p) (583) (17,672) (6,459)
Financial expense, net (Note 5.q) (326,405) (181,427) (102,197)
Net (loss) income before income tax (73,498) (27,463) 5,200
Income tax (Note 5.r) (41,267) (19,770) (13,442)
Net loss from continuing operations (114,765) (47,233) (8,242)
Discontinued operations
Loss from discontinued operations (Note 5.s) (4,918) (9,226) (1,717)
Net loss for the year (119,683) (56,459) (9,959)
Other comprehensive income
Translation differences (1)
138,245 55,405 26,832
Total other comprehensive income 138,245 55,405 26,832
Total comprehensive income (loss) for the year 18,562 (1,054) 16,873
(Loss) income attributable to:
Owners of the Company (119,683) (56,459) (11,103)
Non-controlling interests - - 1,144
Net loss for the year (119,683) (56,459) (9,959)
Comprehensive income (loss) attributable to:
Owners of the Company 18,562 (1,054) 15,729
Non-controlling interests - - 1,144
Total comprehensive income (loss) for the year 18,562 (1,054) 16,873
(1) Corresponds mainly to the exchange difference resulting from the conversion process to the presentation currency of
Genneia S.A. which will not be reclassified to profit and loss in future periods.
Notes 1 to 16 are an integral part of and should be read in conjunction with these consolidated financial statements.
3
GENNEIA S.A.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
AS OF DECEMBER 31, 2013, 2012 AND 2011
(amounts expressed in thousands of Argentine pesos – Note 3.1)
Shareholders’ contributions Retained earnings Equity attributable to:
Capital
stock
Issuance
premiums
Subtotal
Irrevocable
contributions
Capital
contributions
Total
Legal
reserve
Other
comprehensive
income
Unappropriated
retained
results
Owners
of the
Company
Non-
controlling
interests
Total
Balances as of January 1,
2011
47,100 331,505 378,605 - - 378,605 744 - 9,963(1) 389,312 17,996 407,308
As decided by the General
Ordinary and Extraordinary
Shareholders’ meeting of
June 1, 2011:
- Appropriation to legal
reserve
- - - - - - 252 - (252) - - -
Acquisition of non-
controlling interests (Note
12.4)
- - - - - - - - - - (19,140) (19,140)
Net loss for the year - - - - - - - - (11,103) (11,103) 1,144 (9,959)
Other comprehensive income
for the year
- - - - - - - 26,832 - 26,832 - 26,832
Balances as of December
31, 2011
47,100 331,505 378,605 - - 378,605 996 26,832 (1,392) 405,041 - 405,041
As decided by the Board of
Directors’ meeting of
February 2, 2012:
- Irrevocable contributions
(Note 8)
- - - 64,800 - 64,800 - - - 64,800 - 64,800
Waiver of interests from
borrowings granted by
related parties (Note 9.2.9)
- - - - 20,048 20,048 - - - 20,048 - 20,048
As decided by the General
Ordinary and Extraordinary
Shareholders’ meeting of
April 13, 2012:
- Increase in capital stock
and appropriation to
special reserve for
issuance premiums from
capitalization of
irrevocable contributions
(Note 8)
4,420 60,380 64,800 (64,800) - - - - - - - -
Net loss for the year - - - - - - - - (56,459) (56,459) - (56,459)
Other comprehensive income
for the year
- - - - - - - 55,405 - 55,405 - 55,405
Balances as of December
31, 2012
51,520 391,885 443,405 - 20,048 463,453 996 82,237 (57,851) 488,835 - 488,835
Net loss for the year - - - - - - - - (119,683) (119,683) - (119,683)
Other comprehensive income
for the year
- - - - - - - 138,245 - 138,245 - 138,245
Balances as of December
31, 2013
51,520 391,885 443,405 - 20,048 463,453 996 220,482 (177,534) 507,397 - 507,397
(1) Includes 40,743 corresponding to initial adjustment for the first time adoption of IFRS.
Notes 1 to 16 are an integral part of and should be read in conjunction with these consolidated financial statements.
4
GENNEIA S.A.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(amounts expressed in thousands of Argentine pesos - Note 3.1)
2013 2012 2011
Cash flows provided by operating activities
Net loss for the year (119,683) (56,459) (9,959)
Adjustments to reconcile net loss for the year to net cash flows provided by operating activities:
Fixed assets depreciation 223,972 159,578 133,314
Intangible assets depreciation - 8
Loss from sale of fixed assets - 6,174 320
Income tax 38,619 14,802 12,517
Loss arising from contractual arrangements - 32,556 -
Minority interest in subsidiary - - 1,144
Account for future investments (Note 12.3) (31,456) - -
Changes in assets and liabilities:
Trade receivables (163,056) (118,776) (67,757)
Other receivables 14,229 (34,992) (82,576)
Inventories (5,076) (15,651) (3,195)
Other assets 214 1,826 (153)
Accounts payable 234,138 152,997 (6) 12,247
Salaries and social security payable 6,492 3,148 6,869
Taxes payable 178 10,735 (1,110)
Other liabilities (637) 378 1,342
Interest payable, exchange differences and others 42,709 17,039 35,329
Net cash flows provided by operating activities 240,643(1) 173,355 (1) 38,340 (1)
Cash flows used in investing activities (4)
Acquisitions of fixed assets (439,531) (232,620) (298,886)(2)
Restricted cash (8,605) 22,118 (22,130)
Proceeds from sales of fixed assets - 10,087 (371)
Net cash flows used in investing activities (448,136) (200,415) (321,387)
Cash flows provided by financing activities
Irrevocable contributions - 64,800 -
Proceeds from notes 414,398 90,000 230,246
Payment of notes (206,178) (161,134) -
Proceeds from loans, net of commissions 212,904 43,432 100,588
Payment of loans (66,042) (41,544) (52,764)
Bank overdrafts (23,468) 23,468 -
Net cash flows provided by financing activities 331,614 19,022 278,070
Increase (decrease) in cash and equivalents (3) 124,121(5) (8,038)(5) (4,977)(5)
Cash and equivalents at the beginning of the year (3) 11,625 19,663 24,640
Cash and equivalents at the end of the year (3) 135,746 11,625 19,663
(1) It includes 214,483, 128,746 and 62,054 as interests paid for the fiscal years ended on December 31, 2013, 2012 and 2011, respectively, and 1,546, 714 and 2,373 corresponding to payments for income taxes for the fiscal years ended on December 31, 2013, 2012 and 2011, respectively.
(2) It includes 26,453 as interests paid for third parties’ financing for construction of fixed assets for the year ended on December 31, 2011.
(3) Cash plus temporary investments with a maturity of less than three months (Note 3).
(4) Main non cash investing activities during the year ended December 31, 2013 comprises the acquisition of the fixed assets of the Pinamar power plant through a financial leasing with Sullair Argentina S.A. and the partial financing of the fixed assets acquired to GR Generación Energética Argentina S.A., as it is described in Note 9.2.8, for a total amount of 57,915 and 45,920, respectively. As of Decemeber 31, 2012, comprises the acquisition of projects and investments in companies in relation to wind and thermal projects. Additionally, cash used in investing activities as of December 31, 2013 is net of 22,230 for acquisitions of fixed assets paid during the previous year. Cash used in investing activities as of Decemeber 31, 2012 includes 73,551 for acquisitions of fixed assets paid during the previous year. There were no significant non cash investing activities during the year ended December 31, 2011.
(5) Includes (3,456), (2,424) and (3,394) of cash flows used in operating activities for the years ended December 31, 2013, 2012 and 2011, respectively, and (718) and (810) of cash flows used in investing activities for the years ended December 31, 2012 and 2011, respectively, corresponding to discontinued operations.
(6) Net of cash used in acquisitions of fixed assets made during the previous year.
Notes 1 to 16 are an integral part of and should be read in conjunction with these consolidated financial statements.
5
GENNEIA S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2013, 2012 AND 2011
(Amounts stated in thousands of Argentine pesos, except where otherwise indicated – Note 3.1)
NOTE 1 – BACKGROUND AND BUSINESS OF THE COMPANY
GENNEIA S.A. (“GENNEIA” or the “Company”) (formerly EMGASUD S.A.), an Argentine corporation, was
incorporated in 1991, has a duration through November 14, 2090 and its legal address is Leandro N. Alem 928, 7th Floor,
Buenos Aires city, Argentina.
After having reoriented its business strategy and discontinued the natural gas distribution and transportation components
during 2012 (see Notes 12.6 and 12.7), and the component of construction of high pressure gas pipelines and gas
distribution networks during 2013, the main activities of GENNEIA have been defined in three business units: (i) the
electric power generation from conventional sources; (ii) the electric power generation from renewable sources; and (iii)
the deregulated natural gas trading, transportation of natural gas and electric power, currently developed through its
subsidiary Enersud Energy S.A. (“ENERSUD”).
Business units – Electric power generation from conventional sources
GENNEIA develops its power generation business from conventional sources through nine thermal power plants with a
total nominal installed capacity of 280 MW, seven of which are connected to the Argentine Interconnection System
(“Sistema Argentino de Interconexión”, “NIS”) and where originally developed under the programs “Energía Distribuída I”
and “Energía Distribuida II” of Energía Argentina S.A. (“ENARSA”) (as it is described below). Furthermore, the power
plants of Río Mayo and Gobernador Costa belong to an isolated system in the Province of Chubut, with 7 MW of installed
capacity.
The programs for the generation of distributed energy have been promoted by the National Government and by ENARSA
in the framework of Resolutions N° 220/07 and 1836/2007 of the Energy Secretariat (the “Secretariat”), which sets forth
the possibility that the holders of assets that imply an additional offer of electric power inexistent as of the moment in
which these resolutions were passed, sell -in association with ENARSA in the case of Resolution N° 1836/2007- the energy
generated by that additional offer.
As part of the Resolution N° 1836/2007 indicated above, the Company originally entered into the relevant Power Purchase
Agreements (“PPA”) GENNEIA-ENARSA for each power plant, which established among other things, (i) a three year
term as from the commercial startup of the respective power plant, (ii) granted an option to ENARSA’s to extend the
agreements for terms up to 24 months, and (iii) a monthly fixed charge denominated in US$ for the energy made available,
a variable charge in US$ for the energy effectively dispatched and a fixed monthly charge in US$ for the operation and
maintenance, which are payable in pesos.
As detailed under Note 12.3, on April 18, 2012, the Company entered into a Framework Agreement (hereinafter the
“Framework Agreement”) with the Secretariat for the renewal of the contracts originally entered with ENARSA under the
framework of Resolution N° 1836/2007, whereby the Secretariat would instruct CAMMESA to enter into PPA with
GENNEIA for each of the power plants under the framework of Resolution N° 220/2007, with similar terms to the
purchase agreements referred to in the preceding paragraph but establishing that each agreement would extend for seven
years as from the completion of the original three year term for each PPA of each power plant, so as to complete a 10 year
term as from the original commercial operation date of each power plant.
In compliance with the provisions of the Framework Agreement, CAMMESA and GENNEIA entered into the
corresponding PPA under the terms of Resolution N° 220/2007 and subject to the other guidelines provided under the
Framework Agreement for the power plants of Pinamar, Concepción del Uruguay, Paraná, Matheu, Las Armas I and
Olavarría, effective as from December 1, 2012, while the power plants of Las Armas II and Bragado will be operated
directly with CAMMESA under the terms of Resolution N° 220/2007 just after the expiration the original PPA of such
power plants on January 21, 2014 and June 16, 2014, respectively. As of the date of issuance of these consolidated financial
statements, the corresponding PPA of the Las Armas II and Bragado power plants are still pending of formalization.
Power plants Río Mayo and Gobernador Costa started commercial operations in June 2008 and September 2009,
respectively. The energy generated is sold to the province of Chubut by means of an agreement, with a term of
effectiveness until December 31, 2025. By means of this agreement, the province of Chubut has assumed the obligation to
pay monthly to GENNEIA (i) a cost for the capacity made available, and (ii) a cost for thermoelectric power generated,
which will be adjusted semiannually based on natural gas price.
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GENNEIA S.A.
Business unit – Electric power generation from renewable sources
Law N° 26,190, enacted in 2006, established a National Promotion Regime to foster the use of renewable energy sources
for electric power generation, which is supplementary to the one set forth by Law N° 25,019 and regulations thereto,
whereby the generation of wind and solar energy had been declared of national interest. Law N° 26,190 provides (as an
energy State policy) that by the end of 2016 up to 8% of the national electric power consumption shall be supplied by
renewable energy sources.
As part of the GENREN Project, promoted by ENARSA in order to fulfill the abovementioned law, in early 2012
GENNEIA started the commercial operation of the Rawson Wind Farm with an installed power capacity of 77.4 MW,
according to the corresponding GENNEIA – ENARSA Agreements of the Rawson Project, which became effective as from
the execution of the PPA of the Rawson Project between ENARSA and CAMMESA. These Agreements, among other
matters, (i) have a term until the earlier of (a) 15 year as from the date of the commercial operation of the respective plant,
(b) the delivery of a quantity of energy dispatched that ENARSA committed to purchase (2,400 GWh for the Rawson Wind
Farm I and 1,425 GWh for the Rawson Wind Farm II), (ii) grant ENARSA the option to renew the PPA for another 18
month period, provided all of the power estimated by the respective PPA has not been delivered, in which case the PPA
will expire, and (iii) provide a fixed price in US$ payable in pesos based on the energy effectively dispatched.
Additionally to the Rawson Wind Farm, through its controlled companies GENNEIA has several wind and thermal energy
generation projects based on renewable sources already awarded for a total of 322 MW.
Business Unit – Commercialization and transportation capacity of natural gas and electricity by ENERSUD
In order to secure its position in the energy trading sector and considering the regulatory limitation it had for being a gas
sub-distributor, in 2005 GENNEIA established its subsidiary ENERSUD, whose main objective is to trade natural gas and
natural gas transport capacity for industrial or domestic use and other services, as well as trading energy.
Since 2005 ENERSUD has been granted one of the Free Agent licenses issued by the Mercado Electrónico del Gas S.A.
(Gas Electronic Market or “MEG”), which enables it to operate in the Argentinean natural gas spot market. In that same
year ENERSUD enrolled in the Registro del Mercado Mayorista de Gas Natural (Natural Gas Wholesale Market Registry)
and in the Registro de Comercializadores (Traders’ Registry). After having discontinued the gas distribution business unit,
as it is mentioned in the following paragraph, on November 7, 2013 GENNEIA enrolled in the previously mentioned
registries, which enable the Company to operate in the Argentine natural gas spot market.
Discontinued components
During 2012, the Board of Directors decided to reorient the Company’s businesses, focusing on the business units
described above and deciding to discontinue the component of natural gas distribution. Additionally, as a result of what is
mentioned in the following paragraph, during the year 2012 the Company discontinued the component of transportation
through the Patagonic Gas Pipeline. Additionally, during the year 2013, the Board of Directors decided to discontinue the
business unit of construction of high pressure gas pipelines and gas distribution networks, that already from the year 2012
were mostly developed in an outsourced manner.
Moreover, as described under Note 12.6, through Resolutions issued by the Gas Regulating Authority (“ENARGAS”)
N° I/2090 and I/2374 dated March 23 and October 22, 2012, respectively, the operation of the Patagonic Gas Pipeline has
been transferred to Camuzzi Gas del Sur S.A. since May 2012.
Also, as described in Note 12.7, in 2012 the Company entered into an agreement with Proagas S.A. for the sale of the
natural gas distribution business unit to enforce the above mentioned discontinuation.
NOTE 2 – BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
2.1 Basis of preparation and purpose of these consolidated financial statements
The consolidated financial statements of GENNEIA and its controlled companies for the years ended December 31, 2013,
2012 and 2011 are prepared in accordance with International Financial Reporting Standard (“IFRS”), as issued by the
International Accounting Standards Board (“IASB”).
These consolidated financial statements are derived from the Company’s consolidated financial statements for the years
ended December 31, 2013 and 2012 and from the Company’s consolidated financial statements for the years ended
December 31, 2012 and 2011, originally issued and filed with the Argentine Securities Commission (“CNV”) and
originally approved by the Board of Directors of GENNEIA and authorized for issue on February 18, 2014 and March 8,
2013, respectively, and do not include certain information required by CNV regulations.
7
GENNEIA S.A.
These consolidated financial statements have been prepared only for their inclusion in the Offering Memorandum to be
prepared by the Company in connection with the Company’s proposed offering of notes under the US$ 400 million note
program, to prospective investors mainly outside of Argentina.
2.2 Applicable accounting policies
The consolidated financial statements have been prepared under the historical cost basis. Historical cost is generally based
on the fair value of the consideration given in exchange for assets.
The principal accounting policies are described in Note 3.
The preparation of these financial statements is the responsibility of the Company's Board of Directors and requires
accounting estimates and judgments of the management when applying financial standards. Areas of high complexity
which require more judgments or those in which assumptions and estimations are more significant are detailed in Note 4.
2.3 Standards and Interpretations issued
2.3.1. New standards issued
Standards and Interpretations or amendments to them, published by the IASB and endorsed by the Argentine Federation of
Professional Councils in Economic Sciences (“Federación Argentina de Consejos Profesionales de Ciencias Económicas”
or “FACPCE”) and the CNV, which have been applied by the Company as from the fiscal year ended December 31, 2013,
are the following: (i) IAS 24 (amended in 2009) “Related party disclosures”; (ii) IFRS 10 “Consolidated financial
statements”; (iii) IFRS 12 “Disclosure of interests in other entities”; (iv) IFRS 13 “Fair value measurement”; and (v)
amendments to IAS 1.
Adoption of the standards and interpretations or amendments to them mentioned in the preceding paragraph did not have a
significant impact on the consolidated financial statements of the Company for the fiscal years ended December 31, 2013,
2012 and 2011.
2.3.2. New standards issued not yet adopted
The Company did not adopt the standards and interpretations or amendments mentioned below, because its application is
not required at the end of the fiscal year ended December 31, 2013:
IFRS 9 Financial instruments 1 Amendments to IFRS 9 and IFRS 7 Mandatory effective date for application of IFRS 9 and
transition disclosures 1 Amendments to IFRS 10, 12 and IAS 27 Investments entities 2 Amendments to IAS 32 Regarding compensation of financial assets and liabilities 2
1 With indefinite deferred implementation date. 2 Effective for fiscal years beginning on or after January 1, 2014.
As of the issuance date of these consolidated financial statements, the Company is evaluating the impact that the adoption
of the standards and interpretations or amendments mentioned in the previous paragraphs will have on the consolidated
financial statements of the Company. It is probable that the changes will not have a significant impact on the consolidated
financial statements of the Company, however, it can not be reasonably determined the impact of the potential effect until a
detailed analysis is performed.
2.4 Basis of consolidation
The consolidated financial statements of GENNEIA incorporate the separate financial statements of the Company and its
controlled entities. They are considered controlled when the Company (i) has power over the investee, (ii) is exposed, or
has rights, to variable returns from its involvement with the investee and, (iii) has the ability to use its power to affect its
returns.
The main consolidation adjustments are the following:
· elimination of assets and liabilities and income and expenses of the parent with its subsidiaries, in order to disclose the balances maintained effectively with third parties; and
· elimination of interests in the equity and earnings of the controlled entities, for each period.
8
GENNEIA S.A.
The latest financial statements available as of the balance sheet date have been used and considering significant subsequent
events and transactions and/or available management information and the transactions between GENNEIA and the
controlled entity.
If necessary, financial statements of controlled entities are adjusted to bring up their accounting policies into line with those
used by the Company.
Detailed below are the controlled companies whose financial statements have been included in these consolidated financial
statements: Main activity Percentage of participation
2013 2012 2011
Subsidiaries:
Enersud Energy S.A. Industrialization, separation and trading of propane and butane gas and/or liquefied gas and trading of natural gas and transportation for industrial or residential consumption.
100% 100% 100%
Ingentis II Esquel S.A. Power generation and trading. 100% 100% 100%
IWS Energy Services S.A. Design, construction, inspection and maintenance of networks and pipelines for natural gas distribution.
100% 100% 100%
Genneia Desarrollos S.A. Production and development of renewable energies and its commercialization.
100% 100% 100%
Nor Aldyl San Lorenzo S.A. Production and development of renewable energy and its commercialization, construction of gas pipelines and networks.
100% 100% -
Nor Aldyl Bragado S.A. Production and development of renewable energy and its commercialization, construction of gas pipelines and networks.
100% 100% -
Patagonia Wind Energy Production and development of renewable energies and its commercialization.
100% 100% -
International New Energy S.A. Design, development and construction of facilities for water, gas, electricity distribution and any other form of energy generation and/or distribution.
100% 100% -
2.5 Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Company, liabilities incurred or assumed and the equity interests issued by the Company in exchange for
control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the
acquisition date, except for certain assets and liabilities measured in accordance with the corresponding accounting
policies.
The goodwill, if any, is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any)
over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed.
During the year ended December 31, 2012 the Company has carried out the business combination mentioned in Note 12.5.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1. Functional and presentation currencies and tax effects on other comprehensive income
Under IFRS the companies should define their functional currency in accordance with the criteria established by
IAS 21 "Effects of changes in foreign currency exchange rates", which may differ from their reporting currency.
Under the above mentioned rule, considering the main activities of the Company as detailed in Note 1, the Board of
Directors has defined the US$ dollar (“US$”) as the functional currency for GENNEIA and Genneia Desarrollos S.A.
As a result, the financial statements of such companies have been converted into US$ by applying the procedure
established in IAS 21. In accordance with the established procedure, monetary assets and liabilities are remeasured
into US$ at the exchange rate prevailing on the balance sheet date. Non-monetary assets, measured on a historic cost
basis, as well as income and expenses are remeasured using the exchange rate prevailing on the transaction date. Any
gain or loss arising from the remeasurement of monetary assets and liabilities into US$ is recognized in the income
statement in the period they are generated. For the other subsidiaries, Management has defined the Argentine peso as
the functional currency. In these cases, the adjustment resulting from remeasuring the financial statements of such
entities into the US$ is recognized under Other comprehensive income.
9
GENNEIA S.A.
In addition, pursuant to General Resolution 562 issued by the CNV, the Company should submit its financial
statements in pesos; hence, the amounts resulting from the process explained above should be converted into pesos by
application of the criteria established by IAS 21. As a result assets and liabilities should be translated at the exchange
rate prevailing on the balance sheet date, and income and expenses should be translated at the exchange rate prevailing
on each transaction date (or, given practical reasons and, insofar as exchange rates do not fluctuate significantly, at the
average exchange rate every month), and the resulting exchange differences are recognized under Other
comprehensive income.
Results accounted for in “Other comprehensive income” related to exchange differences arising from investments in
companies with functional currencies other than U.S. dollars and also as a result of the translation of the financial
statements of GENNEIA to its reporting currency (pesos) have no effect on the current or deferred income tax because
as of the time that such transactions were generated, they had no impact on net income nor taxable income.
3.2. Foreign currencies
In preparing the consolidated financial statements, transactions in currencies other than the Company’s functional
currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the
end of each reporting year, monetary items denominated in foreign currencies are translated to functional currency at
the rates prevailing at that date. Exchange differences on monetary items are recognized in profit and loss in the year
in which they arise.
3.3. Financial assets
Financial assets include: cash, time deposits in financial entities, equity instruments of other companies, contractual
rights, or a contract which will or can be liquidated with the delivery of equity instruments of the Company.
Financial assets are classified into the following specified categories: ‘financial assets measured at fair value through
profit and loss’, ‘held-to-maturity’, ‘available for sale’, and ‘loans and receivables’. The classification depends on the
nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets must be recognized on trade date, when the Company commits to purchase or sale an asset. The
recognition method is consistent for all purchases or sales of financial assets of the same category.
Financial assets are initially measured at fair value, plus transaction costs, except for those financial assets designated
as financial assets at fair value through profit or loss.
3.3.1 Cash and cash equivalents
Include cash, time deposits in financial entities and short-term investments with maturity up to 90 days, with low risk
of value variation and destined to cancel short-term liabilities.
2013 2012 2011
Cash 31,479 11,625 19,604
Current Investments 104,267 - 59
Cash and cash equivalents 135,746 11,625 19,663
3.3.2 Financial assets at fair value through profit and loss
The financial assets at fair value through profit and loss are stated at fair value, with any gains or losses arising on
remeasurement recognized in the consolidated statements of profit and loss and other comprehensive income. The net
gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is
included in the “Financial expense, net” caption in the consolidated statement of profit and loss and other
comprehensive income.
3.3.3 Held-to-maturity financial assets
Comprises investments over which the Company has the positive intent and ability to hold to maturity. Subsequent to
initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method
less any impairment. Revenue is recognized on an effective yield basis.
3.3.4 Loans and receivables
Loans and receivables are non-derivate financial assets with fixed or determinable payments that are not quoted in an
active market. Loans and receivables are measured at amortized cost using the effective interest method, less any
impairment.
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GENNEIA S.A.
3.3.5 Effective interest method
The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all taxes paid or received, transaction costs and other premiums or discounts) through the
expected life of the financial asset.
Income is recognized on an effective interest basis for financial assets other than those financial assets classified as
fair value through profit and loss.
3.3.6 Impairment of financial assets
Financial assets are assessed by the Company for indicators of impairment at the end of each year. Financial assets are
considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the financial asset have been affected.
3.3.7 Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for
amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized
borrowing for the proceeds received.
3.4. Inventories
Materials and spare parts are stated at the weighted average cost reduced, if necessary, to net realizable value. The net
realizable value is the estimated price of sale less estimated selling costs. Materials and spare parts in transit have been
value at acquisition cost.
Based on Management´s analysis at December 31, 2013, 2012 and 2011 no allowance for inventory has been
recognized for materials and spare parts. Such analysis takes into consideration the conservation status, their future
use and the net realizable value of the inventories.
3.5. Fixed assets
· Lands and buildings held for use in production, supply of services or for administrative purposes, machinery and
equipment, tools, facilities, furniture and equipment and vehicles, are stated in the consolidated statement of
financial position at their cost less any subsequent accumulated depreciation (except for land which is not
depreciated) and less any recognized impairment loss.
Depreciation of buildings, machinery and equipment, tools, facilities, furniture and equipment and vehicles is
charged to expense for each year.
· Work in progress at the end of each year is carried at cost, less any recognized impairment loss. These assets are
classified in the appropriate category of fixed assets when the construction is completed and are ready for use.
Depreciation of these assets commences when the assets are ready for their intended use. The Company has
capitalized the corresponding portion of financial costs related to third parties’ financing of long-term construction
of fixed assets.
· Improvement on third party assets are stated at cost less accumulated depreciation and accumulated impairment
losses.
· Assets acquired through financial leasing agreements have been incorporated at the lower value of the cash
purchase price and the sum of discounted values of the minimum payments of the assets, calculated at the implied
interest rate of the leasing, with a counterpart in “Loans – Financial leasings” of current and non-current liabilities.
· Depreciation is recognized so as to write-off the cost or valuation of assets (other than land) less their residual
values over their useful lives, using the straight-line method. The estimated useful lives and residual values are
reviewed at each year end, with the effect of any changes in estimates being accounted for on a prospective basis.
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GENNEIA S.A.
· An item of fixed assets is derecognized upon disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Gain or loss derived of the sales proceeds disposal or retirement of an item of
fixed assets is determined as the difference between the sales proceeds and the carrying amount of the asset and it is
recognized in the consolidated statement of comprehensive income.
3.6. Assets under concession - Service concession agreements
The value of assets for the generation power plants Mayo and Costa as indicated in Note 1 (hereinafter, “the
infrastructure”) are recognized pursuant to the provisions of the IFRIC 12 “Service Concession Agreements”.
IFRIC 12 requires that certain assets being recognized in accordance with its provisions when the following
conditions are met: (i) the grantor controls or regulates the services that the Company has to provide with the
infrastructure built or to be built, to whom must provide them and at what price; (ii) the infrastructure involved in the
concession agreement is completely consumed in the concession period or the grantor controls any significant residual
interest on the infrastructure at the end of the service agreement; and (iii) the infrastructure is built or purchased by the
Company for the sole purpose of implementing the service agreement.
In this context, the Company acts as a supplier of two services: one for the construction of the power plants used to
provide electricity as a public service and another for the operation of such plants during the period of the concession.
The Company recognizes and measures revenues from construction services in accordance with the provisions set in
IAS 11 "Construction Contracts" while revenues from operating services are recognized and measured in accordance
with IAS 18 "Revenues". The consideration to be received by the Company for its services in construction is a right to
make charges to the grantor of public service that is recognized as assets under concession. That asset is measured at
the fair value at the time of initial recognition.
3.7. Intangible assets
Intangible assets include, mainly, costs of acquisition of new projects. The accounting policies for the recognition and
measurement of these intangible assets are described below.
3.7.1 – Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized
at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less
accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired
separately.
3.7.2 – Derecognition of an intangible asset
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net
disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
3.8. Impairment of tangible and intangible assets
At the end of each reporting year, the Company reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the
recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of
allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they
are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can
be identified.
In the impairment assessment, the assets that do not generate independent cash flows are grouped in an appropriate
cash generating unit. The recoverable amount for such assets or the cash generating unit is measured as the higher of
its fair value (calculated by using the discounted future cash flows method) and its book value.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
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GENNEIA S.A.
3.9. Other assets
Correspond to costs incurred by the Company concerning the development of projects related to pipelines and electric
power generation construction activities which are measured at their acquisition cost or construction cost at each fiscal
year end, which do not exceed their estimated recoverable value, net of the corresponding allowance to reduce its
carrying amount to the probable realizable value.
3.10. Non-current assets available for sale
Non-current assets for disposal are classified as held for sale if their book value is recoverable through a sale
transaction and not through its continuous use. This condition is met only where the sale is highly probable and the
asset (or group of assets for disposal) is available for immediate sale in its current condition. Management should be
committed to the sale, which should be expected to qualify as sale completed within one year as from the
classification date.
Non-current assets classified as held for sale are measured at the lower of book value and fair value less costs to sell.
3.11. Liabilities
The Company recognizes a liability when it has a present obligation (legally enforceable as a result of the execution of
a contract or a requirement contained in a legal standard) resulting from a past event and whose amount owed can be
reliably estimated.
3.12. Financial liabilities
Financial liabilities are classified as fair value through profit or loss or as other financial liabilities.
Financial liabilities, including borrowings, initially measured at fair value, net of transaction costs, are
subsequently measured at amortized cost using the effective interest method. Interest charges are included in the
“Financial expenses, net” caption of the consolidated statement of profit and loss and other comprehensive income.
The Company derecognizes financial liabilities (or a part of them) when, and only when, the Company's obligations
are discharged, cancelled or they expired.
The difference between the carrying amount of the financial liability derecognized and the consideration paid is
recognized in profit or loss.
3.13. Other liabilities
Other liabilities have been valued at nominal value which does not significantly differ from their discounted value.
3.14. Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation
at the end of the reporting year, taking into account the risks and uncertainties surrounding the obligation. When a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present
value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
The Company has been sued in certain labor, civil and commercial lawsuits. Provisions for contingencies are recorded
on a risk assessment basis and when the likelihood of a loss is probable. The assessment of a loss probability is based
on the opinion of legal counsels of the Company and its Management.
3.15. Revenue recognition
The Company derives its revenues mainly from power generation and sale of energy contracts.
Revenues derived from electric power generation are measured at the fair value of the consideration received or
receivable and are recorded as sales when realized. For such purpose, they should meet the following criteria: there is
an agreement with the client, the price is fixed or determinable, the service was provided and collection is reasonably
secured.
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GENNEIA S.A.
Interest income is recognized based on the yields calculated by the effective rate method.
3.16. Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases. There are no situations in which the
Company qualifies as a lessor.
Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of
the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is
included in the consolidated statement of financial position as loans.
Lease payments are recognized in profit and loss as financial expenses and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability.
Leases are classified as operating when the lessor does not transfer substantially all risks and rewards inherent to the
ownership of the asset upon lease.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed.
3.17. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalized to the
cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Other borrowing costs are recognized as expenses in the period in which they are incurred.
3.18. Income tax and minimum presumed income tax
3.18.1 Income taxes – current and deferred
Income tax expenses represent the sum of the tax currently payable and the deferred tax.
3.18.1.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before
income tax as reported in the consolidated statement of profit and loss and other comprehensive income
because of items of income or expense that are taxable or deductible in other years and items that are never
taxable or deductible. The Company’s liability for current tax is calculated using tax rate that have been
enacted or substantively enacted at the end of the year. The current income tax charge is calculated on the basis
of the tax laws in force in Argentina.
3.18.1.2 Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax basis used in the computation of taxable results.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets,
including tax loss carry forwards, are generally recognized for all deductible temporary differences to the
extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilized.
Such deferred assets and liabilities are not recognized if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable results nor the accounting results.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which
the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or
substantively enacted by the end of the year. The measurement of deferred tax liabilities and assets reflects the
tax consequences that would follow from the manner in which the Company expects, at the end of the year to
recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
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GENNEIA S.A.
Under IFRS, deferred income tax assets and liabilities are classified as non-current assets and non-current
liabilities.
3.18.1.3 Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss in the consolidated statement of profit and loss and
other comprehensive income, except when they relates to items that are recognized directly in equity, in which
case, the current and deferred tax is recognized directly in equity or when current tax or deferred tax arises
from the initial accounting for a business combination.
3.18.2 Minimum presumed income tax
The minimum presumed income tax complements the income tax. The Company determines the tax charge by
applying the enacted rate of 1% to the taxable assets at the end of year. The Company´s tax obligation will
coincide with the higher between the determined minimum presumed income tax and the income tax liability
determined applying the enacted 35% tax rate over the estimated taxable result of year. Nevertheless, if the
presumed income tax in a fiscal year exceeds the corresponding income tax, such excess may be computed as a
prepayment of any income tax excess over the minimum presumed income that may be generated in the next
ten years.
3.19. Shareholders’ equity accounts
Shareholders’ contributions and reserves accounts were prepared in accordance with the accounting standards in force
on the transition date to IFRS. Changes to such accounts were accounted for pursuant to the respective decisions of
the Shareholders’ Meetings, regulatory and statutory rules (Issuance premiums and Reserves) although such items
would not have existed or would have had a different balance if the IFRS have been applied in the past.
Capital stock
Includes capital contributions committed or paid in by shareholders, and includes all outstanding shares at par value.
Issuance premiums
It is the difference between the subscription price of capital increases and the corresponding par value of issued
shares.
Capital contributions
Corresponds to transactions with shareholders that, as provided by IFRS and CNV rules, and based on the substance
over form principle, are assimilated to capital contributions and, thus, their effects are directly recognized under
Shareholders’ equity.
Legal Reserve
In accordance with the provisions of Law N° 19,550, the Company is required to set up a legal reserve of at least 5%
of net income, which results from the sum of income/loss for the year, the adjustments to prior years, the transfers
from other comprehensive income and accumulated losses from prior years, until such reserve reaches 20% of the sum
of issued capital and capital adjustment accounts, if any.
Unappropriated retained results
It includes the retained earnings / losses without specific appropriation, which in case of being positive may be
distributed pursuant to a resolution by the Shareholders’ meeting, insofar as they are not subject to statutory
restrictions, as that described in the previous paragraph. Includes earnings / losses from prior years that were not
distributed, the amounts transferred from other comprehensive income and the adjustments to prior years according to
accounting standards.
In addition, pursuant to the provisions of CNV rules, when the net balance of the Other comprehensive income
account is positive, it cannot be distributed, capitalized or appropriated to absorbing accumulated losses, and when the
net balance of such account is negative, a restriction shall apply to the distribution of retained earnings by such
amount.
Under Law N° 25,063, passed in December 1998, dividends distributed, either in cash or in kind, in excess of
accumulated taxable income at the end of year immediately preceding the payment or distribution date, will be subject
to 35% as an income tax withholding as a sole and final payment. Accumulated taxable income for the purposes of
this tax includes the balance of accumulated accounting profits at year end immediately preceding the effective date of
the Law less dividends paid plus the taxable income determined from that exercise.
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GENNEIA S.A.
Additionally, Law No. 26.893 enacted on September 20, 2013, established certain modifications to the Income Tax
Law, and determined, among other topics, a withholding tax as a sole and final payment of 10% over dividends
distributed either in cash or in kind -except in shares- to foreign beneficiaries, and to individuals resident in Argentina,
notwithstanding to the above mentioned withholding in the previous paragraph. In accordance with the Shareholders’
Agreement, the approval to distribute dividends to the shareholders requires the favorable vote of a qualified majority
of the Company´s capital stock. However, the Company is limited in the distribution of dividends by certain
restrictive covenants assumed in connection with the issuance of the negotiable obligations (Note 9).
Other comprehensive income
It includes income and expenses directly recognized under Shareholders’ Equity and the transfers of such items from
Shareholders’ Equity accounts to income for the year or retained earnings accounts, as established by IFRS.
NOTE 4 – CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
In the application of the Company’s accounting policies, the Management and Board of Directors are required to make
judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from
other sources. The estimates and assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future years.
Company’s Management make estimates, among others, in order to measure at a given moment the accruals for unbilled
receivables, allowances for uncollectable accounts, the fair value of assets and liabilities, the estimate about contingent
liabilities, the recoverable value of assets, the income tax expense, the recoverable value of deferred tax assets, cumulative
tax loss carryforwards and minimum presumed income tax credits, the useful life of fixed assets, and the functional
currency, among others.
Below is a detail of the accounting areas and items that require that management make significant judgments and estimates
in preparing these consolidated financial statements:
Functional Currency
The Company’s Management applies its professional judgment in determining its functional currency and of its controlled
entities. Judgement is basically made regarding the currency that mainly influences and determines sales prices, labor and
material costs, investments and other costs, as well as the financing and collections derived from its operating activities.
Fair value of financial assets and liabilities
In preparing its consolidated financial statements, the Company estimates the fair value of its financial assets and liabilities.
Fair value is measured as the price that would be received to sell an asset or to paid a liability in an orderly transaction
between market participants at the measurement date. If there is a quoted price available for that instrument in an active
market, fair value is calculated based on that price.
If there is no active market available for that financial instrument, its fair value is estimated on the basis of the price
established in recent transactions involving the same or similar nature instruments and, in the absence thereof, on the basis
of valuation techniques, using valuation techniques commonly used by the financial markets. The present value method is
used for estimating the fair value of financial instruments of receivables and payables including loans. Company’s
Management applies judgement in estimating expected future cash flows and the rate used to discount such expected cash
flows related with the applicable currencies.
Estimate of contingent liabilities for claims and lawsuits
The final outcome arising from litigation, claims and other contingencies, as well as the perspective given to each issue by
the Management may vary from their estimates due to different interpretations of laws, contracts, opinions and final
assessments of the amount of the claims. Changes in the facts or circumstances related to these types of contingencies can
have, as a consequence, a significant effect on the amount of the provisions for litigation and other contingencies recorded
or the perspective given by the Management.
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GENNEIA S.A.
Recoverable value of deferred tax assets, tax loss carryforwards and credits for minimum presumed income tax
The Company recognizes tax loss carryforwards and other tax credits as deferred tax assets when it is probable its
deduction against future taxable income. To that effect, based on paragraph 26 of NIC 12, the Company considers the
projected taxable income and the reversal of temporary liability differences.
In order to determine the likelihood of realization and estimate the recoverable amount of such assets, Management projects
taxable income on the basis of several future variables, including the estimate of the Argentine currency devaluation against
the US dollar for the following years. Such estimates are periodically reviewed and their effects are recognized in the
period in which a revision is performed.
Account for future investments
As mentioned in Note 12.3, CAMMESA deducts from its monthly payments to the Company an amount appropriated to set
up an “Account for future investments” which might be used to the installation of certain power plants.
Such payments are recorded as Company’s revenues in the period of accrual based on a regulatory and legal analysis made
by Company’s management, in consultation with its legal advisors.
Recoverable value of assets
The Company generally estimates the recoverable value of fixed assets, assets under concession and intangible assets on
the basis of their economic use value, calculated as the discounted expected future cash flows generated by each asset or
group of assets under evaluation.
In order to estimate cash flows, the Company’s Management calculates revenues and future costs based on its best estimate
of the regulatory framework, tariffs, fuel costs, devaluation and inflation of the Argentine peso, salaries, wind farm
utilization factor and the rate used to discount such cash flows, among others.
NOTE 5 – DETAIL OF THE MAIN ACCOUNTS OF THE CONSOLIDATED FINANCIAL STATEMENTS
The breakdown of the main accounts of the consolidated financial statements is as follows:
Consolidated balance sheets as of December 31, 2013, 2012 and 2011
Assets
2013 2012 2011
a) Cash:
Cash 4,167 3,912 2,727
Banks (1) 19,726 5,302 15,593
Checks to be deposited 7,698 2,710 1,351
31,591 11,924 19,671
(1) As of December 31, 2013, 2012 and 2011, it includes 112, 299 and 67, respectively, as restricted cash deposited in the Guarantee and Payment Trust Fund of Emgasud S.A. Negotiable Obligations constituted as a collateral in relation to the issuance of negotiable obligations Class II and III.
b) Investments:
Mutual fund (1) 113,767 708 23,117
113,767 708 23,117
(1) Includes restricted cash of 9,500, 708 and 23,058 as of December 31, 2013, 2012 and 2011, respectively, in relation to the Guarantee and Payment Trust Fund of Emgasud S.A. Negotiable Obligations constituted as a collateral in relation to the issuance of negotiable obligations Class II and III.
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GENNEIA S.A.
2013 2012 2011
c) Trade receivables:
Current
Trade receivables - Electric power generation 345,938 141,491 61,459
Accruals for unbilled sales of Electric power generation 103,218 146,908 115,076
Trade receivables - Gas pipelines construction 350 10,248 5,248
Trade receivables - Sale of gas and others 20,191 13,392 24,974
Accruals for unbilled sales of gas consumption and gas
transportation 7,230 1,832 1,989
Allowance for doubtful accounts (Note 5.m) - - (1,380)
476,927 313,871 207,366
Non-current
Patagonic Gas Pipeline construction (1) 3,790 3,790 3,790
Other gas pipelines construction - - 3,378
3,790 3,790 7,168
(1) A portion of the work of the Patagonic Gas Pipeline Trust, as well as the construction of Ramales Río Pico and Corcovado, were financed
through a Financial Trust managed by Nación Fideicomisos S.A. according to Decree Nº 180/04 and Resolution MPFIPSyS Nº 185/04. As
regards to the mentioned works, the Company maintains as of December 31, 2013, 2012 and 2011, balances of aging accounts receivable past
due for 7,580, which have been measured at their estimated discounted value of 3,790 as of December 31, 2013, 2012 and 2011. As of the date of issuance
of these consolidated financial statements, GENNEIA has claimed to the Trust and to the Province of Chubut as fiduciary for the collection of
these accounts, and is taking the necessary steps for that purpose (Note 12.6).
Aging of past due but not impaired trade receivables
2013
Up to three months 168,710
Three to six months 48,392
Six to nine months 12,266
Nine to twelve months 5,291
More than one year 33,852
Balance at end of year 268,511(1)
(1) In relation to the aging for past due receivables, see Note 7.3.3.
d) Other receivables: 2013 2012 2011
Current
Related parties (Note 6) 12,587 2,180 2,048
Value added tax - 27,008 55,161
Income tax advances and withholdings and minimum presumed
income tax (net of minimum presumed income tax payable) 433
6,449
1,958
Prepaid expenses 1,648 1,066 451
Advanced payments to suppliers 1,631 2,678 1,165
Construction costs to be recovered 1,622 1,522 1,301
Accrual for unbilled construction costs 358 6,127 4,914
Receivables from insurance companies - 24,619 -
Prepaid insurance 15,088 7,532 2,778
Receivable for investment in Patagonian Pipeline (Note 12.6) 8,143 6,392 -
Rights for the reception of gas - - 1,425
Miscellaneous 9,956 6,894 4,501
51,466 92,467 75,702
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GENNEIA S.A.
2013 2012 2011
Non-current
Account for future investments (Note 12.3) 31,456 - -
Debt Instruments – Gasoducto Loop Regional Sur Trust (1) 13,056 13,056 13,056
Value added tax 9,845 - 246
Minimum presumed income tax credit 46,933 17,832 18,628
Related parties (Note 6) 2,028 2,059 23,061
Turnover tax 4,712 6,417 7,510
Advanced payments to suppliers 7,422 24,977 11,782
Working costs to be recovered 4,768 3,537 278
Receivable for investment in Patagonian Pipeline (Note 12.6) 38,470 40,312 -
Miscellaneous 3,808 1,260 1,633
162,498 109,450 76,194
(1) It corresponds to representative debt instruments related to the construction work of Gasoducto Loop Regional Sur. At the date of issuance of
these consolidated financial statements, the gas charge corresponding to this trust is pending of enactment by the Secretariat, from which the
trust will proceed to pay the respective installments (Nota 12.8).
e) Inventories:
Current
Materials and spare parts 1,799 1,826 7,823
Work in progress for third parties - 8,020 -
1,799 9,846 7,823
Non-current
Materials and spare parts 31,978 18,855 5,227
31,978 18,855 5,227
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GENNEIA S.A.
f) Fixed assets, assets under concession and intangible assets:
Evolution of fixed assets
2013
Cost
Main account
Accumulated
at the
beginning of
year Increases Decreases Transfers
Translation
difference
Accumulated
at the end of
the year
Land 14,617 - - - 4,765 19,382
Furniture and fixture 1,968 15 - - 628 2,611
Machinery 7,039 169 (166) - 2,264 9,306
Computer equipment 13,597 3,222 - - 4,749 21,568
Communication equipment 245 4 - - 81 330
Vehicles 6,512 - (462) - 2,004 8,054
Buildings and installations 1,651 6,628 - - 1,912 10,191
Tools 1,452 394 (146) - 474 2,174
Materials and spare parts 267 - - (240) 2 29
Pipelines 48,217 - - - (79) 48,138
Power generation equipment 1,073,633 458,557 (29,211) 67,768 460,106 2,030,853
Wind Farm 753,367 - - - 245,557 998,924
Fixed assets for gas distribution business 3,488 - (4,625) - 1,137 -
Work in progress 40,144 95,754 (110) (67,528) 20,409 88,669
Total 2013 1,966,197 564,743 (34,720) - 744,009 3,240,229
Total 2012 1,760,661 74,121 (110,814) - 242,229 1,966,197
Total 2011 1,187,847 493,056 (30,480) - 110,238 1,760,661
2013
Accumulated Depreciation
Main account
Accumulated
at the
beginning of
year % Increases Decreases
Translation
difference
Accumulated
at the end of
the year
Net book
value at
12-31-13
Net book
value at
12-31-12
Net book
value at
12-31-11
Land - - - - - - 19,382 14,617 11,607
Furniture and fixture 1,762 10% 56 - 567 2,385 226 206 149
Machinery 6,131 10% 1,264 (132) 2,043 9,306 - 908 1,553
Computer equipment 11,073 33% 1,658 - 3,719 16,450 5,118 2,524 2,648
Communication equipment 225 33% - - 89 314 16 20 11
Vehicles 3,504 20% 840 (419) 1,499 5,424 2,630 3,008 2,041
Buildings and installations 367 10% 1,594 - 187 2,148 8,043 1,284 1,112
Tools 487 10% 61 (68) 273 753 1,421 965 505
Materials and spare parts - - - - - - 29 267 316
Pipelines 13,999 3%-7% 3,231 - 14 17,244 30,894 34,218 72,795
Power generation equipment 435,483 5%-10% 160,982 (2,827) 166,886 760,524 1,270,329 638,150 646,005
Windfarm 41,571 6% 47,146 - 21,923 110,640 888,284 711,796 -
Fixed assets for gas distribution business 3,488 - - (4,625) 1,137 - - - 23,412
Work in progress - - - - - - 88,669 40,144 673,476
Total 2013 518,090 216,832 (8,071) 198,337 925,188 2,315,041
Total 2012 325,031 159,844 (23,126) 56,341 518,090 1,448,107
Total 2011 188,075 133,243 (15,934) 19,647 325,031 1,435,630
Allowance for impairment of fixed assets - - (10,329)
Total 2,315,041 1,448,107 1,425,301
20
GENNEIA S.A.
Evolution of assets under concession:
2013
Cost
Main account
Accumulat
ed at the
beginning
of year Increases Decreases Transfers
Translation
difference
Accumulated
at the end of
the year
Power generation equipment 30,487 - - 5,808 11,311 47,606
Work in progress 5,202 223 - (5,808) 383 -
Total 2013 35,689 223 - - 11,694 47,606
Total 2012 27,752 3,587 - - 4,350 35,689
Total 2011 24,721 952 - - 2,079 27,752
2013
Accumulated Depreciation
Main account
Accumulat
ed at the
beginning
of year % Increases Decreases
Translation
difference
Accumulated
at the end of
the year
Net book
value at
12-31-13
Net book value
at
12-31-12
Net book value
at
12-31-11
Power generation equipment 12,356 - 8,272 - 6,497 27,125 20,481 18,131 18,792
Work in progress - 5% - - - - - 5,202 1,071
Total 2013 12,356 8,272 - 6,497 27,125 20,481
Total 2012 7,889 3,091 - 1,376 12,356 23,333
Total 2011 4,586 2,807 - 496 7,889 19,863
Evolution of intangible assets
2013 2012 2011
Book value at the beginning of the year 31,675 - 8
Acquisitions through business combinations (Note 12.5) - 27,526 -
Translation difference 10,324 4,149 -
Depreciation - - (8)
Allowance for impairment of intangible assets (Note 5.m) (11,624) - - -
Book value at the end of the year 30,375 31,675 -
g) Other assets
Non-current
Construction of gas pipeline - Santa Fe Ruta 34 15,149 11,425 9,999
Miscellaneous - 214 33
Allowance for construction of gas pipeline - Santa Fe Ruta 34
(Note 5.m) (15,149)
(11,425) (9,999)
- 214 33
21
GENNEIA S.A.
h) Assets classified as held for sale and liabilities associated with assets classified as held for sale:
As described in Note 12.7, the Company and Proagas S.A. entered into an agreement whereby the Company sold its natural gas distribution business. The major types of assets and liabilities of the distribution business as of the fiscal year ended December 31, 2012 were the following:
2013 2012 2011
Assets classified as held for sale:
Trade receivables – Sale of gas and others - 11,998 -
Accrual for unbilled consumption of gas - 1,031 -
Allowance for doubtful accounts - (4,374) -
Fixed assets in the natural gas distribution business - 25,379 -
Allowance for impairment of fixed assets (Note 5.m) - (25,379) -
- 8,655 -
Liabilities associated with assets classified as held for sale:
ENARGAS withholdings payable – Decree N° 2067 - 4,772 -
- 4,772 -
Liabilities
i) Accounts Payable:
Current
Trade 410,629 172,583 125,949
Accrual for invoices pending to receive 106,050 101,818 148,329
Accrual for construction costs - 7,956 1,259
Advances from customers 2,870 3,031 -
Related parties (Note 6) 285 213 799
519,834 (1) 285,601 276,336
(1) Includes 94,040 past due up to three months, 17,398 from three to six months, 82,857 from six to nine months, 67,890 from nine to twelve
months and 169,166 over a year. See Note 7.3.3 in relation to the aging of past due account payables.
22
GENNEIA S.A.
2013 2012 2011
j) Loans:
Current
Negotiable obligations 172,498 189,137 85,168
Other bank and financial debts 119,504 54,089 37,102
Related parties, net of commissions (Note 6) 24,475 16,057 111,235
Financial leasings 47,568 982 857
Bank overdraft - 23,468 -
364,045 283,733 234,362
Non-current
Negotiable obligations 1,227,632 677,427 567,126
Other bank and financial debts 218,938 79,225 85,125
Related parties, net of commissions (Note 6) 174,925 139,676 232,725
Financial leasings 27,085 1,054 400
1,648,580 897,382 885,376
k) Salaries and social security payable:
Salaries, social security and withholdings payables 22,309 13,299 10,657
Social security and withholdings payables – Regularization
regime - 2,518 2,013
22,309 15,817 12,670
l) Taxes Payable:
Current
Minimum presumed income tax payable (net of advances) 9,679 13 454
Income tax payable 2,919 3,523 -
Value added tax 12,025 3,062 -
Tax withholdings payable 7,015 3,213 1,375
ENARGAS withholdings payable - Decree No. 2067
- - 3,559
Turnover tax 247 1,196 -
Taxes under regularization regime 297 380 381
Program for the rational use of energy
- 494 338
Miscellaneous - 2,153 1,705
32,182 14,034 7,812
Non-current
Taxes under regularization regime 815 1,665 1,923
815 1,665 1,923
ll) Other Liabilities:
Current
Liability with the Province of Chubut on the purchase of
Ingentis II shares 17,277
15,632
14,500
Miscellaneous 920 3,202 838
18,197 18,834 15,338
23
GENNEIA S.A.
m) Allowances and provisions:
Consolidated statements of profit and loss and other comprehensive income for the
years ended December 31, 2013, 2012 and 2011
n) Net sales:
2013 2012 2011
Revenue from electric power generation from conventional sources 664,486 549,715 535,325
Revenue from electric power generation from renewable sources 209,414 162,175 -
Revenue from gas trading and transport 48,724 31,910 22,574
922,624(1) 743,800(1) 557,899(1)
(1) As of December 31, 2013, 2012 and 2011, 91%, 91% and 94% of sales, respectively, are made to CAMMESA and ENARSA.
ñ) Cost of sales:
Purchases of fuel and gas transportation (203,919) (91,367) (60,927)
Operating costs of electric power generation from conventional sources (Note 5.o) (292,787) (329,266) (316,380)
Operating costs of electric power generation from renewable sources (Note 5.o) (78,557) (57,230) -
Operating cost of gas trading and transport (Note 5.o) (4,076) (5,164) (7,000)
(579,339) (483,027) (384,307)
Items
Value as
of Jan. 1,
2011
Net
additions
Translation
difference
Value as
of Dec. 31,
2011
Net
additions
Translation
difference
Value as
of Dec. 31,
2012
Net
additions
(decreases)
Translation
difference
Value as
of Dec. 31,
2013
Allowances deducted from assets:
For doubtful accounts of gas
distribution business 589 791 - 1,380 2,994 - 4,374 (4,458) 84 -
For other assets 9,237 - 762 9,999 - 1,426 11,425 - 3,724 15,149
For impairment of fixed assets of gas
distribution business 9,542 - 787 10,329 12,561 2,489 25,379 (26,432) 1,053 -
For impairment of intangible assets - - - - - - - 11,624 - 11,624
Total deducted from assets 19,368 791 1,549 21,708 15,555 3,915 41,178 (19,266) 4,861 26,773
Provisions included in liabilities:
For claims and pending labor lawsuits 1,021 517 - 1,538 362 - 1,900 - - 1,900
Total included in liabilities 1,021 517 - 1,538 362 - 1,900 - - 1,900
24
GENNEIA S.A.
o) Operating costs and expenses:
2013
Operating cost of
electric power
generation from
renewable sources
Operating cost of
electric power
generation from
conventional
sources
Operating cost of
gas trading and
transport
Administrative
expenses Selling expenses
Total
Salaries and benefits 3,100 26,521 312 41,715 3,311 74,959
Social security charges and other contributions 413 5,572 54 5,573 613 12,225
Professional fees 23,903 17,681 - 8,564 - 50,148
Directors and statutory auditors’ fees - - - 5,220 - 5,220
Expenses for development of new businesses - - - 6,573 - 6,573
Other staff costs 19 79 - 1,626 - 1,724
Travelling and lodging expenses 207 3,139 - 888 143 4,377
Freight and insurance 2,255 15,316 - 729 - 18,300
Rental of property, machinery and equipment 9 32,602 - 2,774 - 35,385
Taxes, rates and contributions 133 2,059 61 2,306 4,588 9,147
Maintenance and repairs 113 2,858 - 1,040 19 4,030
Works contracts and other services 655 4,509 - - - 5,164
Fixed assets depreciation 47,301 171,469 3,231 1,949 22 223,972
Miscellaneous 449 10,982 418 2,090 52 13,991
Total 2013 78,557 292,787 4,076 81,047 8,748 465,215
2012
Operating cost of
electric power
generation from
renewable sources
Operating cost of
electric power
generation from
conventional
sources
Operating cost of
gas trading and
transport
Administrative
expenses Selling expenses
Total
Salaries and benefits 2,114 19,387 602 25,926 1,715 49,744
Social security charges and other contributions 298 4,427 113 3,336 227 8,401
Professional fees 13,734 28,125 - 15,923 2 57,784
Directors and statutory auditors’ fees - 6,947 - 6,947
Expenses for development of new businesses - - - 4,597 - 4,597
Other staff costs 53 42 - 2,364 - 2,459
Travelling and lodging expenses 119 2,461 - 1,667 15 4,262
Freight and insurance 1,956 6,147 - 839 - 8,942
Rental of property, machinery and equipment 6 143,057 - 2,650 - 145,713
Taxes, rates and contributions 57 3,593 3 2,177 6,833 12,663
Doubtful accounts - - - - 2,994 2,994
Maintenance and repairs 37 850 - 1,828 2 2,717
Works contracts and other services 292 4,317 - - - 4,609
Fixed assets depreciation 38,485 114,029 3,224 2,853 - 158,591
Miscellaneous 79 2,831 1,222 6,061 181 10,374
Total 2012 57,230 329,266 5,164 77,168 11,969 480,797
25
GENNEIA S.A.
2011
Operating cost of
electric power
generation from
renewable sources
Operating cost of
electric power
generation from
conventional
sources
Operating cost of
gas trading and
transport
Administrative
expenses Selling expenses
Total
Salaries and benefits - 9,535 1,016 24,137 - 34,688
Social security charges and other contributions - 2,366 184 3,470 - 6,020
Professional fees - 33,521 - 8,028 - 41,549
Directors and statutory auditors’ fees - - - 3,943 - 3,943
Other staff costs - 56 - 1,266 - 1,322
Travelling and lodging expenses - 1,647 - 2,542 - 4,189
Freight and insurance - 3,447 - 525 - 3,972
Rental of property, machinery and equipment - 129,412 - 2,143 - 131,555
Taxes, rates and contributions - 760 14 1,834 4,485 7,093
Doubtful accounts - - - - 831 831
Maintenance and repairs - 569 - 1,405 - 1,974
Works contracts and other services - 1,737 - - - 1,737
Fixed assets depreciation - 126,751 3,231 2,661 - 132,643
Miscellaneous - 6,579 2,555 2,452 14 11,600
Total 2011 - 316,380 7,000 54,406 5,330 383,116
2013 2012 2011
p) Other expenses, net:
Effects arising from contractual arrangements (1) - (28,007) -
Miscellaneous (583) 10,335 (6,459)
(583) (17,672) (6,459)
(1) It includes (3,438), (7,243) and 963 corresponding to a change of estimates related to the accrual made in previous year for electric power pending of invoicing, in relation to power plants Matheu, Pinamar and Bragado, respectively, as a result of the new price for firm capacity established in the Framework Agreement signed with the Secretariat to extend the term of the agreements for electric power generation from conventional sources (Note 12.3) and (18,289) corresponding to the additional costs agreed with Proenergy Services International Inc. in relation to the contract for maintenance services already expired (Note 12.9).
q) Financial expense, net:
The breakdown of financial income and expenses is as follows:
Financial income
Interest income and others 16,029 25,612 1,327
Exchange difference 148,592 44,634 13,350
164,621 70,246 14,677
Financial expense
Interest expense (217,905) (151,605) (84,484)
Exchange difference (235,095) (73,485) (26,673)
Issuance costs and withholdings (19,774) (21,114) (5,597)
Miscellaneous (18,252) (5,469) (120)
(491,026) (251,673) (116,874)
Total financial expense, net (326,405) (181,427) (102,197)
26
GENNEIA S.A.
r) Income tax:
The consolidated income tax charge from continuing operations for the years ended December 31, 2013, 2012 and 2011
is as follows:
2013 2012 2011
Current income tax from continuing operations (5,926) (5,771) (3,341)
Deferred income tax from continuing operations (35,341) (13,999) (10,101)
(41,267) (19,770) (13,442)
The reconciliation between the consolidated income tax charge from continuing operations for the years ended
December 31, 2013, 2012 and 2011 and the charge that would result from applying the prevailing tax rate on the net
(loss) income before income tax, included in the consolidated statement of profit and loss and other comprehensive
income for each year, is as follows:
2013 2012 2011
Net (loss) income before income tax from continuing operations (73,498) (27,463) 5,200
Tax rate 35% 35% 35%
Tax rate applied to net (loss) income before income tax from
continuing operations 25,724
9,612
(1,820)
Permanent differences and others at prevailing tax rate:
Tax loss carryforward (30,825) (10,230) -
Translation differences and others (36,166) (19,152) (11,622)
(41,267) (19,770) (13,442)
Furthermore, the breakdown of the consolidated net deferred tax liabilities as of December 31, 2013, 2012 and 2011, is
as follows:
2013 2012 2011
Deferred tax assets
Tax loss carryforward 193,196 86,924 46,179
Other assets 4,345 5,949 3,523
Loans - - 10,389
Miscellaneous 5,304 4,907 1,961
Total deferred tax assets 202,845 97,780 62,052
Deferred tax liabilities
Fixed assets, assets under concession and intangible assets (323,866) (156,747) (87,005)
Total deferred tax liabilities (323,866) (156,747) (87,005)
Net deferred tax liabilities (1) (121,021) (58,967) (24,953)
(1) Includes 3,433, 1,260 and 538 of net deferred tax assets of subsidiaries that have been recorded in other receivables as of
December 31, 2013, 2012 and 2011, respectively.
27
GENNEIA S.A.
At December 31, 2013, the Company and its subsidiaries maintain a deferred tax asset for accumulated tax loss
carryforwards of approximately 193,196, which may be offset against taxable income as follows:
Year until it can be used
Tax loss
carryforward
Deferred asset
2014 142,300 (1) -
2016 5,100 1,785
2017 149,200 52,203
2018 397,500 139,208
694,110 193,196
(1) Includes 25,300 of specific tax loss caryforwards for the year 2009 whose deferred tax asset has not been recognized since it has been evaluated
as non recoverable.
As of December 31, 2013, GENNEIA estimated an income tax loss of approximately 378 million, and consequently,
recognized a minimum presumed income tax expense which was capitalized under the caption “Other non current
receivables” of the balance sheet as of such date.
The Company recognizes tax loss carry-forwards and other tax credits as deferred tax assets when it is probable its
deduction against future taxable income. To that effect, based on paragraph 26 of NIC 12, the Company considers the
projected tax results and reverse of temporary liability differences.
To assess the probability of recoverability and estimate the recoverable amount of deferred assets related to tax loss
carryforwards, Management has projected the tax income based on various future variables including an estimate of the
peso devaluation against the US$ for the next fiscal years. Such estimates are reviewed periodically and the effects of
such reviewed estimates will be recognized in the period of the revision. In virtue of such analysis, as December 31,
2013 and 2012, the Company recognized in the statement of profit and loss and other comprehensive income for the
fiscal years then ended a loss of approximately 31 and 10 million, respectively, related to tax loss carryforwards that
will expire in the year 2014, and with a high probability of not being used.
s) Results from discontinued operations:
2013 2012 2011
Revenue from construction of pipelines and networks - 41,291 29,692
Revenues from gas distribution 606 13,480 12,182
Revenues from gas transport - 3,541 10,375
Operating costs of pipeline construction (953) (42,302) (30,655)
Cost of gas distribution (1,301) (6,615) (6,576)
Operating cost of gas distribution (1,612) (7,679) (6,065)
Cost of gas transport - (901) (2,000)
Operating cost of gas transport (359) (2,448) (9,595)
Other cost of pipeline construction (3,947) - -
Impairment of fixed assets (Note 12.7) - (12,561) -
Income tax 2,648 4,968 925
(4,918) (9,226) (1,717)
28
GENNEIA S.A.
NOTE 6 – BALANCES AND TRANSACTIONS WITH RELATED PARTIES
The principal outstanding consolidated balances as of December 31, 2013, 2012 and 2011 for transactions with related
parties are as follows:
2013 2012
Other receivables
Accounts
payable Loans Other receivables
Accounts
payable Loans
Current Non current Current Current Non current Current Non current Current Current Non current
Shareholders and directors:
Alejandro Pedro Ivanissevich - - - 8,458 - - 31 - 4,536 -
Andreas Keller Sarmiento 279 - - - - 277 - - - -
Juan Manuel Arias 64 - - - - 64 - - - -
Fintech Energy LLC 768 - - - - 765 - - - -
Jorge Horacio Brito 208 - - - - 206 - - - -
Jorge Pablo Brito 208 - - - - 206 - - - -
Delfín Jorge Ezequiel
Carballo 208 - - - - 206 - - 943 20,656
Delfín Jorge Carballo - - - 589 13,042 - - - 449 9,836
Prado Largo S.A. 35 - - - - 174 - - - -
Fides Group S.A. - 2,028 - - - - 2,028 - - -
Otras related companies:
Energías Sustentables S.A.(1) 10,442 - 285 1,891 7,760 - - 213 1,279 7,279
Macro Bank Ltd. (2) - - - 14,453 140,006 - - - 2,469 54,098
Banco Macro S.A. (2) - - - 218 16,303 - - - 7,339 50,702
Nor-Aldyl S.A. (1) 375 - - - - 282 - - - -
12,587 2,028 285 25,609 177,111 2,180 2,059 213 17,015 142,571
2011
Other receivables
Accounts
payable Loans
Current Non current Current Current Non current
Shareholders and directors:
Alejandro Pedro Ivanissevich 951 21,033 - 3,613 -
Andreas Keller Sarmiento 156 - - 618 -
Juan Manuel Arias 36 - - - -
Fintech Energy LLC 371 - - 83,415 151,931
Jorge Horacio Brito 112 - - 6,012 -
Jorge Pablo Brito 112 - - 6,012 -
Delfín Jorge Ezequiel
Carballo 112 - - 6,895 18,077
Delfín Jorge Carballo - - - 421 8,608
Prado Largo S.A. 198 - - - -
Fides Group S.A. - 2,028 - - -
Otras related companies:
Energías Sustentables S.A.(1) - - 94 -
Macro Bank Ltd. (2) - - - 2,313 47,344
Banco Macro S.A. (2) - - - 485 10,760
Latin American Investment
Group Ltda. - - 705 - -
2,048 23,061 799 109,784 236,720
(1) Company related to the shareholder Fides Group S.A.
(2) Company related to the shareholders Delfín Jorge Ezequiel Carballo, Jorge Pablo Brito and Jorge Horacio Brito.
29
GENNEIA S.A.
The main consolidated operations with related parties for the years ended December 31, 2013, 2012 and 2011 are as
follows:
2013 2012
Purchases of
goods and
services
Recovery
(reimbursement)
of expenses,
investments and
other services,
net
Loans
received
(paid), net
Loans
granted
(collected),
net
Interests and
commisions
gained (lost),
net
Purchases of
goods and
services
Recovery
(reimbursement)
of expenses,
investments and
other services,
net
Loans
received
(paid), net
Loans
granted
(collected),
net
Interests and
commisions
gained (lost),
net
Shareholders and directors:
Alejandro Pedro Ivanissevich - - - - (1,289) - - - (21,815) (151)
Fintech Energy LLC - - - - - - - - - (4,105)
Jorge Horacio Brito - - - - - - - - - (67)
Jorge Pablo Brito - - - - - - - - - (67)
Delfín Jorge Ezequiel Carballo - - - - (426) - - - - (2,770)
Delfín Jorge Carballo - - - - (1,334) - - - - (1,239)
Otras related companies:
Energías Sustentables S.A.(1) 666 17 1,481 - (996) 8,955 - - - (958)
Macro Bank Ltd. (2) - - - - (10,138) - - - - (6,817)
Banco Macro S.A. (2) - - 7,813 - (7,187) - - - - (6,855)
666 17 9,294 - (21,370) 8,955 - - (21,815) (23,029)
2011
Purchases of
goods and
services
Recovery
(reimbursement)
of expenses,
investments and
other services,
net
Loans
received
(paid), net
Loans
granted
(collected),
net
Interests and
commisions
gained (lost),
net
Accionistas y directores:
Alejandro Pedro Ivanissevich - - - 20,752 240
Andreas Keller Sarmiento - - - - (148)
Juan Manuel Arias - - - - (47)
Fintech Energy LLC - - 219,738 - (21,948)
Jorge Horacio Brito - - - - (173)
Jorge Pablo Brito - - - - (173)
Delfín Jorge Ezequiel Carballo - - - - (728)
Delfín Jorge Carballo - - - - (264)
Fides Group S.A. - - - 428 -
Otras related companies:
Energías Sustentables S.A.(1) 2,276 - - -
Macro Bank Ltd. (2) - - - - (1,454)
Banco Macro S.A. (2) - - 10,509 - (479)
Mesquite Holdings B.V. (3) - - - - (4,774)
2,276 - 230,247 21,180 (29,948)
(1) Company related to shareholders Fides Group S.A. (2) Company related to shareholders Delfín Jorge Ezequiel Carballo, Jorge Pablo Brito and Jorge Horacio Brito. (3) Company related to AEI Utilities S.L., former shareholder of the Company.
Additionally, during the first quarter of 2012 the Company cancelled a private convertible negotiable obligation for US$ 15
million with related parties and approved the waiver of the related interests (see Note 9.2.9).
Additionally, the Company has granted an indemnity to its Directors in the exercise of their duties.
As it is mentioned in Note 12.5, during the fiscal year enderd December 31, 2012, the Company acquired from its related
parties Alejandro P. Ivanissevich, Fides Group S.A., Maximiliano Ivanissevich y Nor Aldyl S.A. intangible assets for an
amount of 27,526 in relation to certain projects originally awarded to them.
30
GENNEIA S.A.
NOTE 7 – FINANCIAL INSTRUMENTS
7.1 - Capital management
GENNEIA manages its capital to ensure its ability to continue as a going concern, managing investment projects, while
maximizing the return to its shareholders through the optimization of debt and equity balance.
The Company takes part in operations which involves financial instruments, stated in statement of financial position, and
intended to attend operative requirements and to reduce the exposure to risks of markets, currency and interest rate.
The management of these risks, as well as their respective instruments, is performed through defined strategies,
establishment of control systems and determination of exposure limits.
The capital structure of GENNEIA consists of net debt (loans, net of cash and cash equivalents) and the Company’s equity.
The Company is not subject to any externally imposed capital requirements.
Debt ratio 2013 2012 2011
Debt (1) 2,012,625
1,181,115
1,119,738 Cash and cash equivalents (135,746)
(11,625)
(19,663)
Net debt 1,876,879
1,169,490
1,100,075
Equity 507,397
488,835
405,041
Debt ratio
3,70 2.39 2.72
(1) The debt is defined as current and non-current loans, as detailed in note 5.j).
7.2 - Financial instruments by category
Company’s Financial instruments were classified accordingly to IFRS 7 in the following categories:
2013 2012 2011
Financial assets
Amortized cost
Cash 31,591(1)
11,924
19,671
Other current and non-current financial assets held to maturity 59,669 (1)
53,368
13,056
Trade receivables 480,717 (1)
317,661
214,534
Other receivables 139,680 (1)
144,310
113,731
Balances with related parties 14,615 (1)
4,239
25,109
At fair value through profit or loss
Other current financial assets 113,767 (2)
708
23,117
Financial liabilities
Amortized cost Accounts payable 519,549 (1)
285,483
275,641
Loans 1,813,225 (3) 1,025,382 775,778
Other Liabilities 18,197 (1) 18,834 18,817 Loans, accounts payable and other liabilities with related parties 199,685 (4) 155,946 344,759
(1) Fair value does not differ significantly from their book value.
(2) Corresponds to investments in mutual funds with price quotation. The fair value was determined based on unadjusted quoted prices (Level 1) in the markets where those
financial instruments trade.
(3) Their estimated fair value, considering interest rates offered to the Company (Level 3) amounted to 1,841,602 as of December 31, 2013.
(4) Includes 285 which fair value do not differ significantly from their book value and 199,400 of loans with an estimated fair value, considering interest rates offered to the
Company (Level 3), amounted to 204,865 as of December 31, 2013.
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GENNEIA S.A.
7. 3 - Risk Management
The Company, through the financial management, coordinates access to domestic and international financial markets and
monitors and manages financial risks associated. According to the nature, financial instruments may involve known or
unknown risks, being important the better possible analysis of the potential of those risks. Among the major risks that could
affect the business of the Company are: market risk (which includes foreign currency risk, interest rate risk and price risk),
credit risk and liquidity risk.
Entering into financial instruments for speculative purposes is not a practice of the Company. As of December 31, 2013,
2012 and 2011 there were no outstanding derivative financial contracts.
7.3.1 – Market risk
7.3.1.1 – Currency risk management
GENNEIA undertakes transactions denominated in currencies different to its functional currency, as described in Note 3.2
(“foreign currency”), consequently, exposures to exchange rate fluctuations arise. Since the functional currency of the
Company is the U.S. Dollar, the Argentine peso is the currency which implies the largest exposure in terms of income
impact.
The carrying amounts at each balance sheet assets and liabilities denominated in foreign currencies are as follows:
Currency Assets
2013 2012 2011
Argentine pesos 764,123
455,363
381,931
Currency Liabilities
2013
2012
2011
Argentine pesos 300,709
220,280
218,416
Net currency exposure 463,414
235,083
163,515
Foreign currencies sensitivity analysis
The following table details the sensitivity of GENNEIA to a devaluation of the Argentine peso in respect to its functional
currency. Sensitivity analysis only includes outstanding foreign currency denominated monetary items and adjusts
translation at the period for a 10% change in the exchange rate.
Currency Profit - (Loss)
2013
U.S. Dollar / Argentine Pesos (46,341)
Net effect (46,341)
In Management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the
exposure at the end of the reporting period does not reflect the exposure during the year. Additionally, the Board of
Directors considers that a substantial part of the assets recorded in foreign currency on the consolidated financial statements
related with CAMMESA and ENARSA will not be exposed to the negative impact of the devaluation as the PPA signed
include a provision for adjustment due to foreign exchange variations. However, as the Company’s has not being
transferring the mentioned adjustments, the balances of such trade receivables has been accounted for its original invoicing
amount in foreign currency.
Subsequent to year end, the exchange rate of the Argentine peso suffered a devaluation of approximately 20% against the
U.S. dollar.
7.3.1.2 - Management of the interest rates risk
GENNEIA and its subsidiaries perform borrowings transactions at both fixed and variable interest rates. Risk is managed in
the Company by maintaining an appropriate mix between fixed and variable rate borrowings. The Company does not use
derivative financial instruments to cover risks on interest rates.
Changes in interest rates may affect income or expenses related to interest on financial assets and liabilities based on a
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GENNEIA S.A.
floating rate; furthermore, they may modify the fair value of financial assets and liabilities that accrue a fixed interest rate.
At the end of each year, the Company's exposure to interest rates over financial assets and liabilities, net is as follows:
Financial Assets - (Liabilities), net
Features 2013 2012 2011
Non-interest bear 259,616
183,553
100,902
Finance lease liabilities (74,653)
(2,036)
(1,257)
Variable-rate financial instruments (194,539)
(123,811)
(12,314)
Fixed-rate financial instruments (1,701,041)
(1,011,141)
(1,093,108)
(1,710,617)
(953,435)
(1,005,777)
The portion of variable interest rate debt is mainly subject to fluctuations of BADLAR rates.
Sensitivity analysis of the interest rates
The following sensitivity analysis has been prepared on basis of the exposure to the interest rates for financial instruments
at the end of the year. For variable-rate liabilities the analysis was prepared assuming that the outstanding balance at the
end of the year was outstanding for the whole year. As of December 31, 2013, if BADLAR market interest rate for
borrowings in Argentine pesos would have been 100 basis points higher than the real basis points of the Company, the net
interest expense for the year ended December 31, 2013 would have increased by 1,945.
7.3.1.3 – Management of price risk
The Company does not have a significant exposure to the price risk, mainly as a result of the PPA described in Note 1 and
12.3, whereby our prices are not materially affected by market price fluctuations in the short-term.
7.3.2 - Management of credit risk
Credit risk refers to the risk arising from the possibility that a financial institution receiving funds or financial investment or
a counterparty in contracts default in its obligations resulting in losses to the Company. To mitigate these risks related to
the transactions other than with the public sector, the Company adopted as practice, only perform transactions with
financial entities with good credit rating. Concerning counterparties in contracts, the Company evaluates its financial
position, establishing credit limits and performs a constant follow-up of balances.
As regards the operations with entities related to the public sector, sales related to energy produced by the Company are
made principally to state-owned companies. Accordingly, the Company’s financial results depend on public sector
spending on energy, transportation and infrastructure facilities and on its ability to bid for and be awarded such contracts.
In turn, public sector spending has depended, and is likely to continue depending, on the economic conditions of the
country.
Government and public sector customers have considerable power to force renegotiation of contract terms with the other
contracting parties. Forced renegotiation of contracts with public sector customers, and delay or default in payment by
public sector agencies may have a substantial adverse effect not only on the Company’s financial situation and results of
operations, but also on its ability to repay its debts. Management periodically assesses the recoverability of receivables
based on aging, payment capacity of the counterparty, nature of the client, security interest received, its legal rights, among
others, and forecast the estimated recoverable value of such receivables.
As described in Note 13, all of the sales from electric power generation from conventional and renewable sources are
carried out with public sector entities or dependent upon the financing of the public sector, in US dollars, and liquidated
considering the exchange rate prevailing at the end of the month in which such power was generated; the resulting
exchange gain/loss as of the actual collection date, which has not been booked as of December 31, 2013 and 2012, is being
negotiated with ENARSA and CAMMESA, and the effects of such negotiation will be recognized during the period in
which the parties reach an agreement.
Note 7.3.3 includes a breakdown of financial assets past due as of December 31, 2013.
7.3.3 - Management of liquidity risk
Liquidity risk is associate a potential mismatch between cash requirements (related to operating and financial expenses,
investments, debt maturities, and dividends) and the financing sources (net income, divestitures, and capacity for new
financing).
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GENNEIA S.A.
The Board of Directors has ultimate responsibility on management liquidity risk, having established an appropriate
liquidity risk for the Company´s management of short, medium and long term funding and liquidity management
requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of
financial assets and liabilities. In this regard, the credit facilities offered to clients are assessed on an ongoing and
consolidated basis; to the extent such facilities are offset against liabilities owed by the same client, considering similar
amounts and terms, regardless of their respective aging. At present, the Company’s management is reconciling balances
held with ENARSA in order to settle past due assets and liabilities.
The following table details the aging of the Company´s financial assets and liabilities as of December 31, 2013.
To be due
Past due
Current
Non-current Without term
0-3 months
3-6 months
6-12 months
1 to 5 years
+ 5 years
Investments -
113,767
-
-
-
-
-
Trade receivables 268,511(1)
212,206
-
-
-
-
-
Other receivables 18,034 (2)
6,810
4,991
21,631
52,508
109,990
-
Total assets 286,545
332,783
4,991
21,631
52,508
109,990
-
Trade accounts payable 431,351(1)
86,382
1,111
-
-
-
990
Loans 8,458(3)
91,089
78,029
186,469
1,648,580
-
-
Other Liabilities 17,737(4)
460
-
-
-
-
-
Total Liabilities 457,546
177,931
79,140
186,469
1,648,580
-
990
(1) Mainly corresponds to account receivables with CAMMESA and ENARSA for the activities of the Company and accounts payable with
ENARSA for natural gas purchases for energy generation. Currently, Company’s Management is reconciling balances with ENARSA in order to cancel past due assets and liabilities.
(2) Mainly corresponds to the balance of debt instruments related to the construction work of Gasoducto Loop Regional Sur (Note 12.8) and balances with related parties.
(3) Mainly corresponds to balances with related parties. (4) Mainly corresponds to the liability with the Province of Chubut for the acquisition of shares of Ingentis II (Note 12.4).
NOTE 8 - CAPITAL STOCK
On February 2, 2012, Fintech Energy LLC (“Fintech”) made an irrevocable capital contribution in the total amount of US$
15 million (equivalent to 64,800), which was accepted by the Board of the Company on the same date (the “Irrevocable
Contribution”).
On successive dates, Fintech executed various agreements for the assignment and transfer of equity interests whereby it
partially assigned its rights, interests and obligations arising from the Irrevocable Contribution to Fides Group S.A.,
Andreas Keller Sarmiento, Jorge Pablo Brito, Jorge Horacio Brito and Delfín Jorge Ezequiel Carballo.
Later on, the Shareholders Meeting held on April 13, 2012 approved the capitalization of the Irrevocable Contribution
together with an increase in the Company’s capital stock by 4,420 through the issuance of 2,209,767 Class A and 2,209,767
Class B common nominative non-endorsable shares of $ 1 nominal value each, and entitled to one vote per share, plus an
Issuance Premium in the amount of 60,380.
Therefore, as of the date of the issuance of these consolidated financial statements capital stock of GENNEIA amounts to
51,520,248, and is composed of (a) 25,760,124 Class A common nominative non-endorsable shares of $ 1 par value each,
entitled to one vote per share; and (b) 25,760,124 Class B common nominative non-endorsable shares, of $ 1 par value
each, entitled to one vote per share. GENNEIA’s capital stock is fully subscribed and paid in.
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GENNEIA S.A.
NOTE 9 - FINANCING
9.1. NEGOTIABLE OBLIGATIONS
9.1.1. Global Negotiable Obligation Program
The Ordinary and Extraordinary Shareholders’ Meeting of the Company held on July 2, 2008 and the Company’s Board of
Directors Meeting held on July 3, 2008 authorized a Global Program for the issuance of Negotiable Obligations, for a
maximum amount of up to US$ 200,000,000 or equivalent amount in other currencies (the “Global Program”).
Aditionally, the Ordinary and Extraordinary Shareholders’ Meeting of the Company held on April 17, 2013 and the
Company’s Board of Directors meeting held on October 23, 2013 authorized the extension of the amount and term of the
Global Program for a maximum amount of up to US$ 400,000,000 or equivalent amount in other currencies. Originally, the
Global Program had a term of 5 years as from CNV Resolution N° 15,987 dated September 25, 2008 which authorized the
public offering of the Global Program. Subsequently, CNV through Resolution N° 17,245 dated December 12, 2013
authorized the extension of the Global Program for 5 years as from the date of such resolution and increased the amount of
up to US$ 400,000,000 or equivalent amount in other currencies.
Below is a description of the main features of the issues outstanding to date in the framework of the Global Program:
Class II and Class III Negotiable Obligations
On November 18, 2010 Class II and III Negotiable Obligations were issued in the amounts of US$ 79,757,019 and
US$ 77,179,200, respectively, payable in pesos at the exchange rate prevailing on the amortization or interest payment
date. They are simple, non-convertible, non-subordinated secured Negotiable Obligations.
Class II and III Negotiable Obligations accrue compensatory interest at a nominal fixed rate of 11% per annum, with
quarterly payment of interest at each principal amortization date.
Class II Negotiable Obligations were subscribed and paid in kind by the delivery of Class I Negotiable Obligations issued
under the Global Program. As a result, the Company did not receive cash proceeds for the issue of Class II Negotiable
Obligations. Class III Negotiable Obligations were subscribed and paid in at the equivalent amount in pesos.
The net proceeds of Class III Negotiable Obligations were used to partially fund the execution of projects Wind Farm
Rawson I and II awarded under the GENREN Project and to fund investments in other non-financial assets to be used for
other power generation projects and/or pay off liabilities, taxes, fees and/or expenses incurred by the Company in relation
to such projects.
Classes II and III Negotiable Obligations mature on September 30, 2017.
Currently, Class II and III Negotiable Obligations are secured by the revenues from Wind Farm Rawson through two trusts
and a first priority registered pledge, with a secured capital value of US$ 44.3 million over four TM 2500 turbines owned
by the Company and acquired to GE Packaged Power Inc.
In relation to the Negotiable Obligations, certain restrictive covenants and events of default have been set forth, including
the following: a) limitations of change of corporate purpose, b) maintenance of Company’s corporate existence, c) certain
restrictions on mergers, spinoffs, etc., d) maintenance of ranking of Negotiable Obligations with respect to any other
unsubordinated debt of the issuer, e) certain restrictions on the sale of assets, f) certain asset maintenance, g) certain
restrictions on new borrowings, h) certain restrictions on transactions with related parties, i) certain restrictions on new
investments, j) certain restrictions on the creation of liens, k) maintenance of collateral, l) certain restrictions on dividend
distributions, m) certain agreements not to restrict payments by controlled companies, n) maintenance of insurance, o)
fulfillment contract obligations related to Energía Distribuida II project (until reaching certain milestones demonstrating
full commercial and operational viability of Rawson I and Rawson II project) and to Rawson I and Rawson II project, p)
compliance with laws, permits and environmental matters, q) compliance with disclosure duties and notification of material
events, r) certain restrictions on the amendment of project agreements.
Class XI Negotiable Obligations
On February 19, 2013, GENNEIA issued Class XI Negotiable Obligations in the amount of US$ 35,000,000 denominated
in United States dollars but paid-in and repayable in pesos, unsecured, to be amortized semiannually in 3 payments
beginning on February 19, 2015, with interests to be paid quarterly at a fixed annual nominal rate of 6.25%.
Proceeds have been exclusively applied to financing part of the Company’s productive investment plan in acquiring and/or
improving the assets used in the electric power generation project.
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GENNEIA S.A.
Class XII Negotiable Obligations
On June 28, 2013 GENNEIA issued Class XII Negotiable Obligations in the amount of US$ 15,000,000, denominated in
United States dollars but paid-in and repayable in pesos, unsecured, to be amortized quarterly in 3 payments beginning on
December 28, 2014, with interests to be paid quarterly at a fixed annual nominal rate of 5%.
Proceeds have been applied to financing (i) partially, productive projects or for the infrastructure of electric power
generation in Argentina, or conclusions or expansions of current projects; and/or (ii) investments in other non-financial
assets for electric power generation projects and/or to pay off liabilities, taxes, fees and/or expenses incurred by the
Company in relation to such projects; and/or (iii) used for working capital in Argentina, that will comprise payment to
suppliers, payment of tax liabilities, payment of salaries and social security liabilities, and other transactions related to
normal business of the Company.
Class XIII Negotiable Obligations
GENNEIA has issued, on December 26, 2013 Class XIII Negotiable Obligations in the amount of US$ 25,000,000,
denominated in United States dollars but paid-in and repayable in pesos, unsecured, to be amortized quarterly in 3
payments beginning on July 16, 2016, with interests to be paid quarterly at a fixed annual nominal rate of 4.75%.
Proceeds will be applied to financing (i) partially, the Company’s productive investment plan in acquiring and/or
improving the assets used in the electric power generation activities; (ii) partially, productive projects or for the
infrastructure of electric power generation, or conclusions or expansions of current projects; (iii) investments in other non-
financial assets for electric power generation projects and/or to pay off liabilities, taxes, fees and/or expenses incurred by
the Company in relation to such projects; and/or (iii) used for working capital in Argentina, that will comprise payment to
suppliers, payment of tax liabilities, payment of salaries and social security liabilities, and other transactions related to
normal business of the Company.
9.1.2. Subordinated convertible negotiable obligations and other secured negotiable obligations.
Class V Subordinated Convertible Negotiable Obligations
On August 25, 2011, the Company issued a private negotiable obligation convertible into preferred shares, subordinated,
fully guaranteed by the Company´s shareholders with a pledge on the respective Company shares, denominated Class V
Subordinated Convertible Negotiable Obligations (“Class V Negotiable Obligations”).
The nominal issue value was US$ 50 million.
Class V Negotiable Obligations were issued in accordance with the terms of the Negotiable Obligations Law and are
subordinated to the Class II and Class III Negotiable Obligations with public offer issued by the Company in conformity
with the subordination terms established in the issue conditions of such Negotiable Obligations.
Class V Negotiable Obligations will be converted, at the option of the holder, in case of occurrence and subsistence of
certain default events, in the amount of Class A preferred shares that, after full conversion of the Class V ON, the Class A
preferred shares represent 51% of the total Company shares outstanding subsequent to issue and 51% of the total votes of
the Company´s shareholders´ meetings. Class V Negotiable Obligations contain commitments and events of default
principally related with non-compliance of payments of principal and interests at maturity, including non-compliance of
payment of certain debts to which is subordinated.
The principal of the Class V Negotiable Obligations accrues interest at an annual nominal fixed rate of 13.75%. Interests
are payable semiannually as from the date of issuance. Principal will be payable in an only installment to be matured on
December 30, 2015.
9.1.3. Negotiable obligations of subsidiaries secured by the Company
Class VI Negotiable Obligations
On August 25, 2011, the Company jointly issued with Genneia Desarrollos S.A. (“GDSA”) (formerly Emgasud Renovables
S.A.) a simple private negotiable obligation, non-convertible into shares, in the amount of US$ 2,500,000, (the “Class VI
Negotiable Obligations”) and paid out to GDSA.
The principal of the Class VI Negotiable Obligations accrues interest at an annual nominal fixed rate of 13.75%. Interests
will be payable semiannually as from the date of issuance. Principal will be payable in an only installment to be matured on
December 30, 2015 and it can be prepaid at GDSA’s option prior to such date.
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GENNEIA S.A.
Class VII Negotiable Obligations
On August 25, 2011, the Company jointly issued with GDSA a simple private negotiable obligation, non-convertible into
shares, for the amount of US$ 2,500,000, fully subscribed by Banco Macro S.A. (the “Class VII Negotiable Obligations”)
and paid out to GDSA.
The principal of the Class VII Negotiable Obligations accrues interest at an annual nominal fixed rate of 13.75%. Interests
will be payable semiannually as from the date of issuance. Principal will be payable in an only installment to be matured
on December 30, 2015 and it can be prepaid at GDSA’s option prior to such date.
9.2. OTHER FINANCING ARRENGEMENTS
9.2.1. Financial leasings
The Company has acquired vehicles and machinery to be used in its operations by entering into financial leases with
financial entities. The average term of such agreements is 36 months and the average nominal implied interest rate ranges
between 18% and 22% per annum. Such agreements provide for a purchase option at the end of the lease term or before
termination, as set forth in said agreements and applicable legislation.
Additionally, the Company has acquired, through a financial lease, fixed assets from Pinamar power plant, as described in
Note 9.2.6.
As of December 31, 2013 the terms of the financial leases are the following:
Terms Financial leasing
Up to a year 47,568
More than a year 27,085
Total 74,653
9.2.2. Financing with UTF
On November 19, 2010 the Company entered into a purchase agreement for the acquisition of two equipments to be
installed in the thermal power plant Bragado which included financing of 65% of the total price of the equipment granted
by the UT Finance Corporation, which amounted to a total of US$ 18,980,000, that was paid in two tranches. The principal
of each tranche will be paid in 18 quarter installments and accrues interest at a nominal rate of 10% per annum. As security
for payment, the Company has set up a first priority pledge on equipment acquired in favor of UT Finance Corporation.
9.2.3. Factoring contract with Nación Factoring
On March 29, 2011, GENNEIA entered into an factoring contract in connection with invoices related to agreements for
natural gas transportation service, by which Nación Factoring put at the disposal a revolving credit line for the maximum
amount of 8,000 renewable as long as there exist available balances in favor of the Company.
The financing has a monthly and consecutive repayment of capital with a 2 month term of grace as from disbursement and
payable in up to 12 monthly installments and accrues interest at a variable interest rate BADLAR base plus 600 basis
points.
Proceeds from the above-mentioned financing were applied to working capital of the Company´s energy generation
projects.
9.2.4. Financing Agreement with Banco del Chubut
On June 17, 2011, the Company entered into a loan agreement with Banco del Chubut Sociedad Anónima. The loan
amounts to 25,000 payable on 48 installments, beginning on February 10, 2012, with a compensatory interest at a variable
annual nominal rate in arrears equivalent to BADLAR plus 4% with a floor of 16%. As guarantee GENNEIA assigned in
favor of the bank the cash flow and collection rights of income, arising from the contract power generation in Río Mayo
and Gobernador Costa. Subsequently, on November 4, 2013 Banco de Chubut granted a new disbursement under such loan
in the amount of 4,600, to be paid in 20 consecutive monthly installments, with final maturity on July 1, 2015, and accruing
interest at the mentioned rate.
Proceeds from the loan were used to replacement of equipment and increase of electric power generation capacity of the
Gobernador Costa Plant and payments to contractors of the Rawson Wind Farm.
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GENNEIA S.A.
9.2.5. Financial Agreement with Banco Hipotecario S.A.
On June 4, 2012 the Company entered into a loan agreement with Banco Hipotecario S.A. for an amount of 22,350
repayable in 48 installments at an annual floating nominal rate in arrears equal to BADLAR plus 5.5%. To secure
compliance with the obligations assumed under the loan, Banco Hipotecario was granted the following: (i) an assignment
of GENNEIA and ENERSUD collection rights under certain natural gas transportation contracts until full repayment of
financing; and (ii) a guarantee by ENERSUD.
The proceeds from the financing above mentioned were applied to working capital.
9.2.6. Finance Lease with Sullair Agentina S.A. (“Sullair”)
On February 14, 2013, the Company and Sullair entered into a lease agreement in relation to fixed assets at the Pinamar
power plant. Under the lease agreement, Sullair transferred to GENNEIA the fixed assets of the Pinamar power plant and
GENNEIA agreed to pay to Sullair 29 monthly and consecutive rentals of US$ 586,207 plus a variable amount in
accordance with the financing rate agreed plus the VAT payable in pesos with the right to exercise a purchase option that
subject to certain conditions (including total repayment in due time and form of the above mentioned rentals), grants the
right to purchase the property in the amount of US$ 1. To secure this transaction GENNEIA has assigned to Sullair a
portion of its collection rights under the PPA entered into with CAMMESA in relation to the Pinamar power plant.
The Company accounted for this transaction as a financed acquisition of fixed assets at the discounted value of future
rentals payable.
9.2.7. Syndicated Loan
On March 21, 2013, GENNEIA entered into a Syndicated Loan Agreement in the amount of 204,500 with Banco Itau
Argentina S.A., Banco Macro S.A., Banco de la Nación Argentina and Banco Industrial and Commercial Bank of China
(Argentina) S.A. (formerly Standard Bank Argentina S.A.) in order to finance the acquisition of four turbines GE TM 2500
to its manufacturer, General Electric (see Note 12.10), installed at the Olavarría and Concepción del Uruguay power plants.
Principal is payable in 20 quarterly and consecutive installments beginning on June 21, 2013. The interest rate for the loan
is equal to the BADLAR rate plus 7%.
This loan is secured by (i) a pledge over the equipment acquired with the proceeds from the loans and (ii) a fiduciary
assignment of certain collection rights under the PPA executed with CAMMESA on February 28, 2013 in connection with
the Olavarría and Concepción del Uruguay power plants.
In relation to this loan, certain restrictive covenants and events of default have been set forth, including but not limited to:
a) limitations of change of corporate purpose, b) maintenance of Company’s corporate existence, c) certain restrictions on
mergers, spinoffs, etc., d) certain restrictions on the creation of liens on the Company’s assets, revenues or obligations and
on the disposal of its assets, e) certain restrictions on new borrowings, f) certain restrictions on transactions with related
parties, g) certain restrictions on new investments, h) certain restrictions on dividend distributions, i) compliance with
certain financial ratios, and j) requirements to provide certain information of the Company.
9.2.8. Agreement with GR Generación Energética Argentina (“GR”)
On September 30, 2013, the Company entered into an agreement with GR for the purchase of the turbine installed at Las
Armas II power plant for a total price of US$ 21,934,753, whereby the operating lease of such turbine held with such
company was deemed terminated with retroactive effects as of March 31, 2013. As a consequence of such agreement,
GENNEIA obtained a financing, net of the cash payments made, in the amount of US$ 9 million, to be paid in 9 quarterly
principal installments, with final maturity on November 15, 2015, plus monthly interest payments at a 15% annual nominal
rate. As guarantee of the transaction, the parties executed a second ranking pledge agreement over the turbine, and the
Company assigned to GR the rights to collect the charges for the power made available and the fees for works under the
power generation agreement related to Las Armas II power plant.
GR had originally purchased the turbine referred to in the above paragraph by way of a loan granted by UT Finance
Corporation to Arkenel S.A. (a GR’s related company). GENNEIA delivered to UT Finance Corporation a guarantee of
payment of such loan by GR as well as any other sum payable to UT Finance Corporation under the loan agreement in the
amount of US$ 7.3 million, equivalent to 50% of the equipment price, with subrogation rights in favor of GENNEIA upon
the potential execution of such guarantee. The last payment of the loan granted by UT Finance Corporation to GR is due in
December 2015. Notwithstanding the previously mentioned transaction, the guarantee referred to above is still effective.
38
GENNEIA S.A.
In addition, GENNEIA guaranteed to GR the payment of eventual incremental costs that may arise in order for GR to make
payment abroad of any United States dollars denominated outstanding balance under the import financing agreement of the
turbine originally granted by Arkenel S.A. to GR (in order for Arkenel to subsequently apply the funds to the repayment of
the foreign loan granted by UT Finance Corporation as described in the above paragraph).
9.2.9. Private Convertible Negotiable Obligation
The Ordinary and Extraordinary Shareholders’ Meeting held on July 13, 2009 and the Board’s Meeting held on August 7,
2009 decided to issue US$ 15,000,000 in convertible negotiable obligations, which was originally privately placed on
August 7, 2009 by Mesquite Holding B.V. (a related company of AEI Utilities S.L., former shareholder of the Company)
(the “Convertible ON”).
On June 1, 2011 Mezquite Holding B.V transferred the Convertible ON to Fintech, and on October 12, 2011, Fintech
partially transferred a total amount of US$ 2,877,272 nominal value of the Convertible ON to Delfín Jorge Ezequiel
Carballo, Jorge Pablo Brito and Jorge Horacio Brito.
On February 1, 2012, the Company fully pre-cancelled the Convertible ON as the holders of such obligation agreed to
waive all the interests accrued as from its issuance up to the pre-cancellation date in the amount of 30,843. Pursuant to the
IFRSs and the CNV Rules, such waiver has been recognized as a transaction with shareholders and therefore, its effect, net
of the relevant deferred tax previously recorded, amounted to 20,048 and has been directly recognized under Shareholders’
Equity as a capital contribution.
9.2.10. Other financing agreements
On June 11, 2008 GENNEIA entered into a loan agreement with Caterpillar Financial Services Corporation (“Caterpillar”)
for the financing of equipment imports purchased from Solar Turbines International Company, whereby the Company
received funding in the amount of US$ 6,231,441 at a nominal rate of 8.625% to be fully amortized on February 17, 2014.
The sums of money owed by GENNEIA under the Agreement are affected by two promissory notes issued by the borrower
in favor of Caterpillar and are secured with a pledge on acquired equipment.
NOTE 10 - OPERATING LEASES
Lease charges for operating leases for the years ended December 31, 2013, 2012 and 2011, amounted to approximately 35,385, 140,170 and 127,915, respectively.
As of December 31, 2013, the estimated future payments related to these contracts are the following:
Up to 1 year From 2 to 5 years
Estimated future payments 3,678 8,692
NOTE 11 - KEY MANAGEMENT COMPENSATION
During the years ended December 31, 2013, 2012 and 2011, directors’ fees and key management´s compensations were
stated as “Administrative expenses” in the statement of profit and loss and other comprehensive income. Fees and
compensation for directors and key executives of the Company for the year ended December 31, 2013, 2012 and 2011
amounted to 15,218, 9,574 and 8,204, respectively, being them short-term benefits and the only benefits granted to
directors and key management.
The Company has no long-term employees’ benefits, nor share-based payments.
NOTE 12 - MAJOR CONTINGENCIES, CLAIMS, CONTRACTUAL COMMITMENTS, GUARANTEES AND
OTHER RELEVANT AGREEMENTS
12.1. Claim from Chubut Tax Authority.
The tax authority of the Province of Chubut (“Dirección Provincial de Rentas” or “DGR”) has made a turnover tax
assessment in connection with certain revenues of the Company from the construction of the Patagonic Gas Pipeline, plus
any interest thereon that may apply. The principal claimed amounts to 4,100, plus interests of approximately 7,000. The
Company has opportunely submitted appeals against such assessment at the administrative stage, giving response to the
charges applied as a result of the administrative proceedings. On October 25, 2010, the DGR notified the Company the
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GENNEIA S.A.
rejection of its appeals and assessed a fine of approximately 1,500. On January 20, 2011, the Company filed appeals
requesting that the ruling whereby the fine was imposed be rendered null and void. In the absence of a resolution on such
appeals, on November 1, 2013 the Company served notice upon the DGR whereby it declared it in delinquency and
notified it that it would bring an administrative appeal with the Superior Court of Justice of Chubut against the DGR -
within the applicable legal terms - for such court to render void the ruling that imposed the fine (which is not final and has
not been enforced yet), and whereby it also sought injunctive relief in order for the Company to be released from the prior
payment of the fine as a condition for the complaint to be admitted, in order for the effects of the ruling imposing the fine
to be suspended and in order for the DGR to refrain from initiating actions for the compulsory collection thereof. On the
other hand, by way of Ruling N° 207/12-EC issued by the Ministry of Economy and Public Credit of the Province of
Chubut on September 12, 2012, such Ministry notified the Company that the appeals it had brought were denied and that
the tax assessment was confirmed, plus interest thereon. The Company brought an administrative complaint against the
DGR with the Superior Court of Justice of Chubut within the applicable legal term requesting that the tax be declared null
and void and unconstitutional, and also seeking injunctive relief against the DGR in order to have the enforcement of such
tax suspended and to have a surety bond admitted as guarantee of payment of the amounts claimed until judgment was
rendered on the merits of the case. These actions were brought by a professional authorized to act before the Superior Court
of Justice of Chubut as business agent. The Superior Court of Justice of Chubut declared that both actions were null and
void on procedural grounds. On July 25, 2013, the Company filed an appeal seeking reversal of the decision rendered by
the Superior Court of Justice of Chubut and requesting that both actions be declared fully effective. The appeal was denied.
Therefore, on September 9, 2013, the Company filed an appeal with the Supreme Court of Justice, which outcome is still
pending. On the other hand, the DGR brought legal proceedings against the Company to collect the tax for a total amount
of 10,600 plus legal costs and expenses, notice of which has not yet been served. The intervening judge has recently
notified the Public Mediation Service of the province that mediation proceedings should be initiated between the parties.
The DGR has requested to cancel such mediation proceedings, which was accepted by the intervening judge. On February
13, 2014, the Company has requested the suspension of the proceeding until the Supreme Court of Justice rules on the
recourse presented and also requested a new hearing. Within the framework of these proceedings initiated by the DGR, the
Company filed a new surety bond sua sponte for the total amount claimed plus 20% on account of future interest and legal
costs and expenses (for a total amount of 12,720) in order to cover any potential seizure. Moreover, the Company filed a
motion with the Supreme Court of Justice requesting that the provincial courts be dismissed from said proceedings for lack
of jurisdiction. Based on the decisions rendered by the Superior Court of Justice of Chubut and the legal actions brought
that are still pending as of the date of these financial statements, the Company’s contingency in connection with the
abovementioned tax claim is deemed possible. Therefore, the Company has not booked such claim as a liability in its
financial statements as of December 31, 2013.
12.2. Agreement with Vestas
In August 2012, the Company has received from Vestas Chile and Vestas Argentina a request for the commencement of an
international arbitrage proceeding to be administered by the International Court of Arbitration of the International Chamber
of Commerce, whereby the firms mentioned above sought that the arbitral panel to be created would declare that the
Company had defaulted on its contractual obligations under (i) the agreement for the supply and installation of wind
turbines in the Rawson Wind Farm entered into between the Company and Vestas Chile on October 15, 2010 (such
agreement, was partially assigned to Vestas Argentina on February 4, 2011); and (ii) the agreement for the maintenance
and warranty of availability from the Rawson Wind Farm entered into between the Company and Vestas Argentina on
October 15, 2010.
The alleged defaults by the Company on the mentioned contracts (both subject to Argentine law) were based, on the one
hand, on the opposition of such companies to the Company’s rejection to use the US$ as payment currency for the
outstanding balance under the Supply Agreement, in the understanding by the Company that the outstanding balance,
corresponding to the payment in Argentina of services performed in Argentina by a Company resident in Argentina should
be paid to Vestas Argentina in Argentine pesos. The outstanding balance amounted to approximately US$ 19.8 million
(including VAT).
On the other hand, the claimants also rejected the full payment already made by the Company in Argentine pesos to cancel
invoices for services rendered in Argentina by Vestas Argentina under the Supply Agreement, in an amount in Argentine
pesos equivalent to EUR 868,705 plus VAT and US$ 111,525 plus VAT. Therefore, in their petition, the claimants
requested that the arbitral panel order payment of those amounts in foreign currency.
Furthermore, they requested that the Arbitral Panel orders the Company to pay certain presumed higher construction costs
related to the Rawson Wind Farm, estimated by the claimants to be US$ 1,870,000.
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GENNEIA S.A.
On the other hand, the claimants required that the Arbitral Panel orders the Company to pay the sum of EUR 8,041,000,
arguing that the financial closing did not occurred within the periods established in the Supply and Commissioning
Agreement for the wind turbines executed by the Company’s affiliates in relation to wind farm projects Puerto Madryn I
and II, Puerto Madryn North, South and West.
The Company did exercise its legitimate right to defend by raising arguments and defenses relevant to the circumstances.
Later, on December 20, 2012 GENNEIA entered into a settlement agreement with Vestas Chile Turbinas Eólicas Limitada,
Vestas Argentina S.A. and Vestas Wind Systems A/S for a final solution to the contractual disputes that gave rise to the
international arbitrage proceedings filed by the companies mentioned above. Under the Agreement, GENNEIA paid
Vestas Argentina S.A. in Argentina as established in the Argentine foreign exchange regulations, all of the sums
outstanding under (i) the Supply and Commissioning wind turbines of the Rawson Wind Farm entered into by the
Company and Vestas Chile Turbinas Eólicas Limitada on October 15, 2010 (as been partially assigned to Vestas Argentina
S.A. on February 4, 2011); and (ii) the agreement to provide maintenance services and warranty of availability of the
Rawson Wind Farm executed between the Company and Vestas Argentina S.A. on October 15, 2010 for a total amount of
108,527 equal to US$ 21,647,283 and EUR 391,526. Thus, both parties agreed to finish the disputes raised in arbitrage and
judicial proceedings.
12.3. Master Agreement between the Secretariat of Energy and GENNEIA. Main contractual aspects.
On April 18, 2012, the Company and the Secretariat entered into a Framework Agreement for the renewal of the contracts
under the framework of the programs Energía Distribuida I and Energía Distribuida II. On January 22, 2013 the Secretariat
ordered CAMMESA to enter into PPA with GENNEIA for each one of the power plants covered by Resolution
N° 220/2007. PPA related to GENNEIA’s power plants (except for Las Armas II and Bragado power plants, that were still
in force), were finally entered into on February 28, 2013. The major points agreed upon are the following:
I. The effective term of each contract shall extend for seven years as from the expiration of the original three year
term of each of the agreements originally celebrated with ENARSA associated to each Power Plant, and thus completing a
ten year term as from the original commercial authorization to operate granted to each power plant.
II. A fixed charge shall be paid for the firm capacity made available to each of the Power Plants and, for the generated
energy GENNEIA shall be remunerated to recover the costs of operations and maintenance associated to the operation of
each Power Plant, which should be approved by the Secretariat.
III. GENNEIA committed to execute the commissioning project of one or more thermal plants for the Generation of
Electric Power, for a total capacity of 200 MW. In this respect, the Secretariat and GENNEIA agreed to set up an
“Account for future investments”, in order to secure and provide part of the financing required for such power plants. As
from October 1, 2012, the account shall be funded from monthly and incremental deductions of part of the payments made
by CAMMESA to GENNEIA under each PPA indicated above. The investment amount for the works is estimated at
US$ 160 million and is required to be completed before April 2019.
In this regard, CAMMESA has deducted from its payments as of December 31, 2013 the total amount of 31,456 allocated
to the abovementioned account, which was booked by GENNEIA's in these consolidated financial statements as a financial
receivable with undefined maturity under the item Non-Current Receivables of the balance sheet.
As a result of the new price conditions agreed upon in the Framework Agreement, the Company modified the estimates
related to accruals for unbilled electric power generation corresponding to prior years in relation to power plants Matheu,
Pinamar and Bragado, accounting for a loss of 3,438 and 7,243 and a gain of 963, respectively, in the line Other expenses,
net in the profit and loss and other comprehensive income statement for the year ended December 31, 2012.
12.4. Agreement to acquire shares of Ingentis II Esquel S.A.
On October 27, 2011, GENNEIA agreed with the Province of Chubut the acquisition of its interest in Ingentis II Esquel
S.A. (“Ingentis II”), representing 39% of the capital stock of such company, for an amount of 14.5 million.
GENNEIA would pay in a 60 calendar days term as from the date of the contract, the amount of 6 million as part of the
purchase price, transferring 1 million and compensating the remaining balance with certain invoices owed by the Provincial
Agency of Public Services to the Company.
Furthermore, the balance of the remainder purchase price of 8,500 would be paid by GENNEIA in five quarter by
consecutive installments in pesos plus a compensatory nominal annual interest of 15% beginning on March 20, 2012.
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GENNEIA S.A.
To the date of issuance of these consolidated financial statements, GENNEIA is not obliged to make any payment, under
the purchase contract of the Ingentis II Esquel S.A. shares, to the Province of Chubut as the parties agreed that the default
of GENNEIA would not occur for non-compliance of its obligations if the Province is in non-compliance of its obligations
under the terms of any agreement entered into between the Province and GENNEIA or its subsidiaries or affiliated, such
event having occurred through the still outstanding non-compliance of the Province in paying certain invoices issued by
GENNEIA for the Río Mayo and Gobernador Costa plants.
12.5. Wind and thermal projects based bio-fuel
Wind projects
On July 23, 2010, GDSA was awarded, under the GENREN program, for the construction and operation of two wind
generation power plants in the Wind Farm Puerto Madryn I and II, each plant with a capacity of 50MW.
Additionally, on March 20, 2012, GDSA exercised a purchase option previously entered into with Alejandro P.
Ivanissevich, Fides Group S.A., Maximiliano Ivanissevich and Nor Aldyl S.A. (the “Vendors”), by which, acquired certain
wind and thermal projects with bio-fuel for a total amount of US$ 5 million. Pursuant to such transaction the Vendors
transferred to GDSA the 95% of the shareholding of Patagonia Wind Energy S.A. (awardee of the North, South and West
Madryn Wind Farm projects, with a total capacity of 120 MW) and International New Energies S.A. (awardee of the wind
pre-projects Punta Negra I and II and General Acha), acquiring ENERSUD the 5% of the remaining shares of such
companies. As a result of the acquisition indicated above and the acquisition described below in relation to the thermal
power plants based on biofuels, the Company and its subsidiaries GDSA and ENERSUD, have recognized an intangible
asset valued at 27,526.
On July 18, 2012 GDSA submitted to ENARSA a revised schedule of proposed electric power works necessary for the
connection to the NIS at 500 kv (since originally a proposal was tendered under the bidding process with access to the
Madryn node at 132 kv), which forced a substantial redesign of the project engineering and the technical, economic and
civil works aspects involved, and hence, a redefinition of the schedule of works involved. In addition, such schedules
provide for the time necessary for ENARSA to carry out, at its own cost and expense, the expansion and increase of
transportation capacity corresponding to Transmission Station (“ET”) Pto Madryn. As part of such tender offer, GDSA also
proposed a temporary alternative to input up to 100 MW in the ET at 132 kv of Transpa in Puerto Madryn, until completion
of the final access at 500kv for the whole 220MW. Subsequently, on June 27, 2013 GDSA and PWE reiterated the schedule
of works involved. ENARSA continues to assess the schedules proposed by GDSA as of the issuance date of these
consolidated financial statements.
The Company, through GDSA, has made much progress in the studies of technology design, identification of critical
suppliers and financial structuring to gradually start up the various projects that form part of the Madryn Wind Farm. As of
the balance sheet date minor civil and road works have already commenced to prepare the site and certain critical
infrastructure, and other financial alternatives continue to be analyzed for the purchase of wind turbines and to commence
larger civil and electric works that are part of the project. For this purpose, on December 30, 2013 GDSA and PWE signed
a Memorandum Of Understanding for the execution of a financing trust for a one year term for the financing of Wind farms
Madryn II, Madryn South, North and West.
Projects involving thermal power plants based on biofuels
Under Bidding Process 1/09 for the GENREN program, GDSA was awarded the Paraná project including a thermal power
plant with biofuels at 34 MW capacity. Under the bidding process indicated, GENNEIA guaranteed to ENARSA the
financial position and solvency of GDSA. On the other hand, based on the agreement to acquire projects from the Vendors
previously described, 95% and 5% of the share capital of Nor Aldyl Bragado S.A. and Nor Aldyl San Lorenzo S.A., who
have respectively been awarded the projects of thermal generation with biofuels Bragado and San Lorenzo with a total
power of 68 MW, were transferred to GENNEIA and ENERSUD, respectively.
The original execution period for the contracts was 390 days for Paraná power plant, 410 days for Bragado power plant and
450 days San Lorenzo power plant, all of them as from notification of the execution of the PPA. On April 25 2012, GDSA,
Nor Aldyl (on behalf of Nor Aldyl Bragado as future assignee of the Bragado Project) and Nor Aldyl San Lorenzo
(collectively the “Companies of the Biofuel Projects”) have asked ENARSA that such period be computed as from the
execution of the Addendum to the supply agreement in order to clearly include and reflect in the contract the new pricing
parameters for the biofuels as set forth in the amendment to the PPA, informed to the Companies of the Biofuel Projects in
August 2011, providing evidence that potential financiers for the project have emphasized the need for such contractual
amendment, considering those changes have made this projects economically not viable. During year 2013, the Companies
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GENNEIA S.A.
of the Biofuel Projects submitted a new petition and two additional letters, requesting that an addendum be executed to the
PPA in order to subject the price adjustment methodology of such agreement to soya oil, the major input used for the
operation of Power Plants.
During November 2013, ENARSA sent two certified return receipt letters requesting that evidence be produced on the
execution and financing status of these projects. Such letters were answered in due time and form stating the need for
formalizing the required additional clauses to restore the economic equation as well as the financing of the projects.
As of the date of issuance of these consolidated financial statements, ENARSA has not yet made a decision as to the
substance of said electric power supply contracts. Therefore, even though the Company is still applying for its rights in
connection with said projects, it recognized a loss on the value of the intangible asset related to them.
12.6. Gas Transportation. The Patagonic Gas Pipeline.
On February 1, 2008 the ENARGAS, through Resolution I/180, defined GENNEIA as operator of the Patagonic Gas
Pipeline through the third party interested figure subjected to Law N° 24,076 and the concordant regulations.
On March 23, 2012, ENARGAS issued Resolution I/2090 whereby it provided that a pending connection to the
Transportadora de Gas del Sur S.A. (“TGS”) gas pipelines system was a necessary requirement to comply with the original
legal framework of the project (Interested Third Party as per section 16 inc. b of Law 24,076), and did not accept the new
schedule of works proposed to carry out such connection proposed by the Company.
According to ENARGAS resolution, the new legal and regulatory possible framework was (i) to transfer the provision of
services and the assets for its operation and maintenance to the zone distributor, Camuzzi Gas del Sur S.A. (“Camuzzi”),
without the need to make the pending connection; or (ii) to transfer the provision of services and assets to TGS, upon
condition that TGS makes the pending connection. Under such Resolution, the ENARGAS decided to award Camuzzi on a
provisional basis the provision of such public service, including the operation and maintenance, until TGS answers within a
term of 30 days whether it was ready to financially afford the connection and provide the service. Otherwise the new legal
framework would be finally consolidated in the hands of Camuzzi. Under the Resolution, the Company was recognized a
tariff related to the recovery of its investment which should be paid by the new operator, through monthly payments until
the end of the useful life of Gasoducto Patagónico; the Resolution further provides that the operation and maintenance
contract between GENNEIA and TGS should be terminated.
In compliance with the provisions of such Resolution, on May 1, 2012, the distribution company Cammuzi provisionally
assumed the operation of the gas pipeline.
The monthly recovery amount to be paid by Camuzzi to GENNEIA as from May 1, 2012 is 579 (plus VAT).
On October 22, 2012, ENARGAS issued Resolution I/2374, providing that the gas pipeline should be definitely considered
as an extension to the Gasoducto Cordillerano system, and that Camuzzi should continue providing the public service with
the Gasoducto Patagónico, including operating and maintenance of the main pipeline, branches and all of the associated
facilities. The Resolution further provided that the works carried out by the Company for a tranche of approximately 70
km are to be conveyed to Camuzzi to form part of its stock of Essential Assets. Additionally, Resolution N° I/2374 ratifies
the temporary provisions of Resolution I/2090 indicated above, including the provision related to the Company’s recovery
of its investment.
As a result of the explanations above, the residual value of the investment made in Gasoducto Patagónico has been
classified as a financial asset under Other receivables caption as of December 31, 2013 and 2012.
Additionally, concerning the construction of the Patagonic Gas Pipeline developed by GENNEIA and ended in year 2007, a
partial work were financed through a financial trust managed by Nación Fideicomisos S.A. according to Decree Nº 180/04
and Resolution MPFIPSyS Nº 185/04. As of the date of issuance of these consolidated financial statements, GENNEIA
maintains a pending amount from the respective trust on account of tasks carried out towards the completion of the works
that adds up to 7,580. Taking into account the delay for collection of such balance, the Company will also claim payment
of the applicable compensatory and punitive interests. The invoices which make up the amount to be recovered were
previously approved by the Province of Chubut.
GENNEIA, has claimed to the trust and to the Province of Chubut, as trustor, the recovery of such a mounts through the
subscription of debt securities (VRD, Valores Representativos de Deuda) on behalf of GENNEIA.
As of the balance sheet date, the Company has not yet received any favorable answer to its periodic letters to Nación
Fideicomisos S.A. (“Nación Fideicomisos”), as trustor, and the Province of Chubut in this respect. Hence, the Company’s
Board of Directors continues to assess various legal alternatives to enforce collection of such receivable.
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GENNEIA S.A.
The uncollected balance for jobs invoiced is recorded in non-current Trade receivables of the balance sheet as of December
31, 2013, 2012 and 2011 until the definitive agreement for debt cancellation is entered into. On the basis of available facts,
such balance was recognized as of December 31, 2013, 2012 and 2011 on a discounted value based on the time in which
the Company considers it will recover the amount that represents the best possible estimate of the amount receivable.
12.7. Agreement with Proagas S.A. (“Proagas”)
On May 21, 2012 GENNEIA and Proagas entered into a preliminary agreement for the sale of the natural gas distribution
business unit. Proagas is a company created by the previous management of the natural gas distribution business unit, in
order to assume and continue the provision of such services.
Under this agreement, Proagas granted GENNEIA an irrevocable option to sell the assets allocated to the provision of the
sub distribution service, so that GENNEIA will cease to provide the distribution services and transfer upon Proagas all
assets and the obligation to provide the services, all contingent upon some conditions precedent established in the
preliminary agreement, including the approval by ENARGAS of the transfer of assets and the provision of service by
Proagas, as well as the actual exercise of the sale option by GENNEIA.
The transaction included the transfer to Proagas of all employees assigned to the business unit at that time under the terms
of section 225 of the Employment Contract Act, and Proagas assuming the obligation to maintain the labor conditions of
such employees and to afford the payment of all salaries and social security charges respectively due after the closing date.
On November 27, 2012, ENARGAS authorized Proagas as gas subdistributor and approved the transfer to Proagas of all
assets allocated to the provision of the service, upon compliance with certain conditions by Proagas, which once satisfied,
endorsed the sign off of the final agreement and the transfer of the distribution of natural gas business unit, on March 18,
2013.
As a consequence of such transaction, on the year ended December 31, 2012, GENNEIA charged on additional impairment
loss on the assets associated to the distribution business unit amounting to 12,481 which increased the allowance recorded
for such assets up to 25,379. Furthermore, those assets were classified as Available for Sale as of December 31, 2012.
12.8. Gasoducto Loop Regional Fueguino (“Tierra del Fuego Gas Pipeline”)
During the year 2006, GENNEIA built parallel lines (Loops) to the main gas supply pipeline operated by Camuzzi. The
construction required a total investment of 17,400, of which GENNEIA contributed with 7,500 in works, as a
consideration for senior debt securities.
As a compensation for a the amount contributed GENNEIA received debt securities which would be redeemed by means
of a charge that would be added to transportation tariff (Cargos Fideicomiso Gas) to be approved by ENARGAS in
accordance with the provisions of Article 7 of the MPFIPyS Resolution Nº 185/2004. As of the date of issuance of these
consolidated financial statements, ENARGAS has not yet approved such charge.
On September 29, 2008, GENNEIA submitted to the Secretariat a note requesting the issuance, by ENARGAS, of the
Cargo Fideicomiso Gas for Tierra del Fuego Gas Pipeline and to communicate to the regional licensee its immediate
receipt and to instruct Nación Fideicomisos S.A. to issue the remaining debt securities as well as to establish their
corresponding redemption conditions.
During the second quarter of 2011, the Company has also sent letters to Nación Fideicomisos requiring the cancellation
of the debt securities issued.
The outstanding balance is included in Other receivables non-current in the financial statements as of December 31, 2013,
2012 and 2011. On the basis of available facts and circumstances, such balance was recognized on the value that
represents the best possible estimate of the amount to be collected.
12.9. Agreement with Proenergy Services (“PES”)
On July 18, 2012, the Company entered into an agreement with PES for extending the term of operation and maintenance
services for the Paraná power plant, for a term of two years as from September 1, 2012. The terms and conditions in this
agreement include additional payments for the provision of maintenance services provided in a previous contract in
relation to power plants Matheu and Paraná, which were under commercial dispute. The total amount agreed upon for
such additional payments amounted to US$ 3 million, which were paid in four installments between 2012 and 2013, and
have been recognized in the profit and loss and other comprehensive income statement in the line Other Expenses, net, in
the year ended on December 31, 2012.
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GENNEIA S.A.
12.10. Agreement with General Electric Argentina (“GE”) for the purchase of 4 turbines
On May 23, 2008, the Company entered into four agreements with GE for the lease of four second-hand mobile
generation units TM2500. The agreements provided a rental payment and fees for the maintenance services for a term of
three years with an option to extend the lease term for an additional period of two years. During the second quarter of
2011, the Company renewed such lease agreements with GE for the generation units used in the Olavarría and
Concepción power plants until September 2012 and October 2012, respectively.
During the second and third quarter of 2012, the Company agreed the purchase of such equipment for an amount of
US$ 11 million per unit. In order to have more time to close the purchase transactions, the respective lease agreements
were extended, first until December 31, 2012 and later until February 28, 2013, with the extension then agreed to
continue until the completion of a structuring process for a syndicated loan to fund the operation, what finally occurred on
March 21, 2013.
As of December 31, 2012, the Company had already made a down payment to GE in an amount equal to US$ 5,000,000
(including VAT) and the outstanding balance of the price, net of discounts previously negotiated with vendor, was paid
off on March 21, 2013 with the proceeds of the bank loan mentioned in Note 9.2.7.
12.11. Claim from National Tax Authority (“Administración Federal de Ingresos Públicos” or “AFIP”)
On February 6, 2014, the AFIP has assessed that the Company has omitted the application of a differential rate of 21% in
social security contributions for its power generation activity from conventional sources for the periods May, 2010 to
December, 2010 on the ground that it would be a service activity subject to that tax rate of 21%, instead of being an
industrial activity subject to a tax rate of 17% as has been applied by the Company. At the date of issuance of these
consolidated financial statements, the Company is able to commence a proceeding before the National Court of Justice in
the Federal Social Security Sector where the Company will challenge that assessment and the fine imposed by the AFIP.
While as of the date of issuance of these consolidated financial statements analogous precedents published by that court
are not known, the Company, in consultation with its legal counsel, believes that there are strong arguments to support the
criteria applied to their social security contributions and, consequently, be able to reverse the assessment of the AFIP
through the abovementioned proceeding.
12.12. Performance bonds
In accordance with the terms of the PPA, the Company is required to contract and maintain performance bonds to
guarantee compliance with its obligations under the PPA throughout their term. As of the issuance date of these
consolidated financial statements, the Company maintains performance bonds contracted with insurance companies for an
aggregate coverage amount of approximately US$ 100.7 million.
NOTE 13 - REGULATORY FRAMEWORK
13.1. Regulatory framework of the gas industry in Argentina
The basic regulatory framework applicable to the Company’s regulated activities is set forth in the Natural Gas Law,
passed in June, 1992, and ruled by Decrees N° 1189/92, N° 1738/92, N° 2255/92, N° 1186/93, N° 2731/93, N° 692/95,
N° 951/95 and N° 1020/95, rulings by ENARGAS and sub-distribution and transportation authorizations. Nowadays, this
regulatory framework is affected by the Public Emergency Law.
The National Government monitors private commercial activities related to the natural gas industry through the
ENARGAS, an independent entity whose aim is to monitor the enforcement of the objectives and provisions of the Natural
Gas Law, the regulatory framework and the contractual conditions applicable to the companies in the natural gas industry.
13.2. Regulatory framework for the electric power industry in Argentina.
Law N° 24,065, passed in 1992 and ruled by Decree N° 1398/92, has established the basic regulatory framework for the
electric power industry in effect today (the “Regulatory framework”) and, besides implementing privatizations of state
companies in the industry, it has divided the industry into four main categories: generation, transportation, distribution and
demand. This framework also establishes the organization of the Electric Wholesale Market (“MEM”) based on the
guidelines set by Decree N° 634/91. Decree N° 186/95 created the role of “participant”, among which it is worth
highlighting the “trader”, defined as a company that, not being part of the MEM, sells electric power.
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GENNEIA S.A.
Thermal power plants that provide energy to the NIS developed by the Company are kept within the regulatory framework
previously described and the Resolutions N° 220/07 and N° 1836/07 of the Secretariat. The Secretariat has authorized the
celebration of PPA between the MEM (represented by CAMMESA) and the companies which contribute with a new offer
of generation to the system through all those projects of installation of additional energy in which the National
Government, ENARSA, or the ones determined by the Ministry of Federal Planning, Public Investment and Services
(“Ministerio de Planificación Federal, Inversión Pública y Servicios” or “MPFIPyS”) take place.
Given the change of title to the power plants as indicated under Note 1 to these financial statements, effective December 1,
2012, GENNEIA acted as MEM Generating Agent of power plants Pinamar, Concepción del Uruguay I, Concepción del
Uruguay II, Paraná, Matheu, Las Armas I and Olavarría, and will also do so for power plants Las Armas II and Bragado
from January 21, 2014 and June 16, 2014, respectively.
The projects of renewable energy are kept within the regulatory Framework established by Law Nº 26,190, which approved
the National Promotion Regime to foster the use of renewable energy sources, ruled by Decree N° 562/09. The purpose of
Law N° 26,190 is to achieve an 8% contribution of renewable sources of energy to the national electricity consumption
within a term of 10 years as from its effective date. Law N° 26,190 also provided an investment scheme for the
construction of new facilities to be used for the production of electric power out of renewable sources which scheme will
remain in force for a term of ten years as from the enactment of the law.
13.3. Reforms to the public offering regime
On December 27, 2012, Congress enacted the Capital Markets Law N° 26,831 which provides an integral reform to the
public offering regime (Law N° 17,811, as amended by Executive Order N° 677/2001) and entered into force as from
January 28, 2013. Among other changes, the new Act grants more regulatory powers to the National State, trough the CNV,
in relation to public offerings as well as the market organization and the requirements of market traders and brokers;
furthermore it eliminates the shareholding requirement for a broker to operate in any given market and delegates upon the
CNV the power to authorize, record and regulate various categories of traders. On September 5, 2013, the CNV issued the
General Resolution N° 622/2013, that established a new ordered text for its Regulations, and provided the regulations for
the capital market.
These consolidated financial statements consider the effects arising from the economic politics and regulations known at
the date of their issuance. All the estimates made by the Company Management have been carried out considering these
politics. The effects of the additional measures to be implemented by the Government and the effects of the implementation
of those adopted previously, will be recognized in the consolidated financial statements at the moment the Company
Management becomes aware of them.
NOTE 14 - CONSOLIDATED BUSINESS SEGMENT INFORMATION
The Company develops their activities in three business units: (i) electrical power generation from conventional sources; (ii) electrical power generation from renewable sources; (iii) trading of natural gas and transportation capacity of natural gas and electric power through its subsidiary ENERSUD. Costs and assets related to corporate administration and discontinued operations are allocated into the segment “Corporate and others”.
46
GENNEIA S.A.
Below is disclosed the information for each business segment as defined by the Company:
Electrical power
generation from
conventional
sources
Electrical Power
generation from
renewable
sources
Trading of
natural gas and
gas
transportation
Corporate and
others
Consolidation
adjustments Total
Fiscal year ended December 31, 2013
Net sales to third parties 664,486 209,414 48,724 - - 922,624
Net inter-segment sales - - 1,001 - (1,001) -
Net sales from continuing operations 664,486 209,414 49,725 - (1,001) 922,624
Income (loss) before financial expense, net and
income tax from continuing operations 181,194 130,857 31,234 (86,850)(2) (3,528) 252,907
Fixed assets depreciation from continuing operations 171,469 47,301 3,231 1,971 - 223,972
Fixed assets investments from continuing operations 550,700 9,104 - 3,800 - 563,604
Assets 1,861,560 1,011,568 188,067 347,052 (168,534) 3,239,713
Fiscal year ended December 31, 2012
Net sales to third parties 549,715 162,175 31,910 - - 743,800
Net inter-segment sales - - 2,797 - (2,797) -
Net sales from continuing operations 549,715 162,175 34,707 - (2,797) 743,800
Income (loss) before financial expense, net and
income tax from continuing operations 126,489 104,321 16,222 (93,066)(2) (2) 153,964
Fixed assets depreciation from continuing operations 111,782 38,473 3,278 7,578 - 161,111
Fixed assets investments from continuing operations 9,609 62,706 19 4,759 - 77,093
Assets 1,007,218 797,590 107,406 260,358(1) (99,677) 2,072,895
Fiscal year ended December 31, 2011
Net sales to third parties 535,325 - 22,574 - - 557,899
Net inter-segment sales - - 8,634 - (8,634) -
Net sales from continuing operations 535,325 - 31,208 - (8,634) 557,899
Income (loss) before financial expense, net and
income tax from continuing operations 155,288 - 14,872 (63,352)(2) 589 107,397
Fixed assets depreciation from continuing operations 124,616 - 4,494 5,602 - 134,712
Fixed assets investments from continuing operations 7,954 481,462 483 4,086 - 493,985
Assets 932,553 688,898 91,369 287,362(1) (130,711) 1,869,471
(1) Includes 70,060 and 110,751 of assets from discontinued operations as of December 31, 2012 and 2011, respectively. (2) Includes (583), (17,672) and (6,459) of Other expenses, net as of December 31, 2013, 2012 and 2011, respectively.
NOTE 15 - SUBSEQUENTS EVENTS
Subsequent events to the year ended December 31, 2013 until the date of the approval of these financial statements affecting the activities of the Company were detailed in previous notes.
NOTE 16 - APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS
These consolidated financial statements as of December 31, 2013, 2012 and 2011 were approved by the Board of Directors of GENNEIA and authorized for issue on February 18, 2014.