<PAGE> 1
COMMISSION FILE NO. 30-203
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM U5S
ANNUAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 1997
FILED PURSUANT TO THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
BY
CONSOLIDATED NATURAL GAS COMPANY
CNG TOWER, 625 LIBERTY AVENUE, PITTSBURGH, PA 15222-3199
<PAGE> 2
CONSOLIDATED NATURAL GAS COMPANY
AMENDMENT NO. 1
FORM U5S - ANNUAL REPORT
For the Year Ended December 31, 1997
This Amendment No. 1 to Consolidated Natural Gas Company's (the Company) Form
U5S Annual Report for the year ended December 31, 1997, is being filed in
connection with the following:
1. The Company inadvertently omitted two investments under "ITEM 5.
INVESTMENTS IN SECURITIES OF NON-SYSTEM COMPANIES" of its 1997 Form U5S.
Accordingly, the table under such item is amended by adding thereto the
following:
Number of Aggregate
Name of Owner Persons Business of Persons Investments
- ------------- ------- ------------------- -----------
CNG Products One Gas industry sponsored $250,000
and Services financing of appliances
CNG One Limited partnership $875,000
promoting economic
development of the City
of Pittsburgh
2. The consolidated financial statements of Buenos Aires Energy Company, S.A.
for the non-annual fiscal period commenced February 20, 1997 and ended December
31, 1997, are included as part of Exhibit I. (2) (Exhibit 99.9.4 for EDGAR
purposes) to the Form U5S. These financial statements are being filed as an
amendment because they were not available as of April 30, 1998, the date of
filing of the Company's 1997 Form U5S.
1
<PAGE> 3
SIGNATURE
The registrant has duly caused this amendment to its annual report to be signed
on its behalf by the undersigned thereunto duly authorized pursuant to the
requirements of the Public Utility Holding Company Act of 1935, such company
being a registered holding company.
CONSOLIDATED NATURAL GAS COMPANY
--------------------------------
(Registrant)
By D. M. WESTFALL
--------------------------------
(D. M. Westfall)
Senior Vice President,
Non-Regulated Business
and Chief Financial Officer
May 13, 1998
2
<PAGE> 1
Exhibit 99.9.4
Exhibit I.(2)(d)
BUENOS AIRES ENERGY
COMPANY S.A.
CONSOLIDATED FINANCIAL STATEMENTS
for the non-annual fiscal period
commenced February 20, 1997
and ended December 31, 1997
<PAGE> 2
BUENOS AIRES ENERGY COMPANY S.A. AND ITS SUBSIDIARY COMPANY
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1997 (NOTES 1 AND 2)
<TABLE>
<CAPTION>
==========================================================================================================================
December 31, 1997 December 31, 1997
(Pesos) (Pesos)
--------------------- --------------------
<S> <C> <C> <C>
ASSETS LIABILITIES
CURRENT ASSETS CURRENT LIABILITIES
Cash and banks (Note 3.a) 1,258,614 Commercial liabilities (Note 3.d) 19,210,053
Investments (Schedule C) 1,524,608 Bank and financial loans (Note 3.e) 18,619,262
Trade accounts receivable (Note 3.b) 40,901,778 Intercompany liabilities (Note 3.f) 6,748,969
Other accounts receivable (Note 3.c) 3,423,890 Social security liabilities (Note 3.g) 3,893,638
---------------------
TOTAL CURRENT ASSETS 47,108,890 Tax liabilities (Note 3.h) 7,107,753
---------------------
NON-CURRENT ASSETS Other liabilities (Note 3.i) 1,097,132
--------------------
Trade accounts receivable (Note 3.b) 1,363,136 TOTAL CURRENT LIABILITIES 56,676,807
====================
Other accounts receivable (Note 3.c) 40,963,668 NON-CURRENT LIABILITIES
Fixed assets (Schedule A) 410,020,052 Bank and financial loans (Note 3.e) 230,000,000
Intangible assets (Schedule B) 21,106,426 Intercompany liabilities (Note 3.f) 4,140,000
---------------------
TOTAL NON-CURRENT ASSETS 473,453,282 Other liabilities (Note 3.i) 1,757,155
--------------------- --------------------
TOTAL NON-CURRENT LIABILITIES 235,897,155
--------------------
TOTAL LIABILITIES 292,573,962
--------------------
MINORITY INTERESTS IN SUBSIDIARIES 126,736,381
--------------------
SHAREHOLDERS' EQUITY 101,251,829
--------------------
TOTAL ASSETS 520,562,172 TOTAL LIABILITIES AND SHAREHOLDERS' 520,562,172
EQUITY
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 3
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
CONSOLIDATED STATEMENT OF INCOME/(LOSS)
For the non-annual fiscal period commenced February 20, 1997 and ended
December 31, 1997
(Notes 1 and 2)
<TABLE>
<CAPTION>
================================================================================
December 31, 1997
(Pesos)
---------------------
<S> <C>
Net sales 117,126,629
Cost of sales (Schedule H) (92,643,101)
---------------------
GROSS PROFIT 24,483,528
---------------------
Marketing expenses (Schedule H) (5,386,880)
Administrative expenses (Schedule H) (5,365,143)
Other expenses (97,800)
Financial and holding gain/(loss) (Note 21)
Generated by assets 1,608,478
Generated by liabilities (12,736,119)
Income tax (1,690,721)
Ordinary loss on minority interests in subsidiaries (1,073,081)
---------------------
ORDINARY LOSS (257,738)
Extraordinary loss (Note 22) (356,633)
Extraordinary income from minority interests 180,100
---------------------
NET LOSS FOR THE PERIOD (434,271)
================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 4
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the non-annual fiscal period commenced February 20, 1997 and ended
December 31, 1997
(Notes 1 and 2)
<TABLE>
<CAPTION>
===================================================
December 31, 1997
(Pesos)
---------------------
<S> <C>
CHANGES IN FUNDS
Funds at beginning of period 6,000
Increase in funds 2,777,222
---------------------
Funds at end of period 2,783,222
=====================
REASONS FOR CHANGES IN FUNDS
Sources of funds
Loss for the period (257,738)
Plus: Items not entailing
applications of funds
Intangible asset 1,096,795
amortization
Accrued intercompany 3,494,686
liabilities pending
payment
Expenses and purchases 17,783,848
pending payment
Accrued social security 2,823,314
and taxes pending
payment
Accrued net financial 5,614,262
income pending payment
Intercompany net 109,472
financial income
pending payment
Fixed asset depreciation 5,931,789
Labor contingencies 197,118
accrued in the period
Materials used up and 1,101,915
others
Income from minority 1,073,081
interests in
subsidiaries
---------------------
39,226,280
---------------------
Less: Items not entailing
sources of funds
Sales pending collection (32,065,384)
Accrued intercompany (57,383)
sales pending collection
---------------------
32,122,767
---------------------
Funds from ordinary 6,845,775
operations
---------------------
Extraordinary loss for the (176,533)
period
Plus: Items not entailing
application of funds
Increase in allowances 356,633
Less: Items not entailing
sources of funds
Loss from minority (180,100)
interest in subsidiaries
---------------------
FUNDS FROM OPERATIONS 6,845,775
---------------------
Other sources of funds
Capital contributions 101,683,100
Minority interest in 123,592,050
subsidiaries
Increase in other liabilities 112,114
Bank and financial loans 288,230,000
Negotiable bonds 230,000,000
Collection of receivables 37,075,035
Increase in intercompany 30,150,000
liabilities
Net changes in tax 5,206,486
liabilities
Increase in other 51,001,000
liabilities transferred
---------------------
TOTAL OTHER SOURCES OF FUNDS 867,049,785
---------------------
TOTAL SOURCES OF FUNDS 873,895,560
---------------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
---------------------
<S> <C>
Other applications of funds
Increase in other receivables (44,248,933)
Payment of financial loans (275,225,000)
Increase in fixed assets (417,053,756)
Payment of liabilities (51,000,000)
transferred
Others (1,650)
Receivables transferred at (43,354,153)
beginning of the period
Payment of intercompany (21,000,000)
liabilities
Increase in intangible assets (19,234,846)
---------------------
TOTAL APPLICATIONS OF FUNDS (871,118,338)
---------------------
INCREASE IN FUNDS 2,777,222
===================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the non-annual fiscal period commenced February 20, 1997
and ended December 31, 1997
NOTE 1: CONSOLIDATED FINANCIAL STATEMENTS
- ------- ---------------------------------
The consolidated financial statements have been prepared
following the procedure established by Technical Resolution
No. 4 of the Argentine Federation of Professional Councils of
Economic Sciences, by consolidating the Company's Balance
Sheet at December 31, 1997, the Statement of Income and the
Statement of Cash Flows for the non-annual fiscal period then
ended, with the financial statements of its subsidiary
company, Inversora Electrica de Buenos Aires S.A. in which it
has enough votes to control the corporate decisions.
The following data reflect the corporate control:
<TABLE>
<CAPTION>
Subsidiary Principal line of business Percentage held
-------------------------------- ---------------------------------------- -----------------------
<S> <C> <C>
Inversora Electrica de Buenos Equity interest in Empresa 55%
Aires S.A. Distribuidora de Energia Atlantica
S.A. (EDEA S.A.). It holds the
corporate control (90%).
</TABLE>
NOTE 2: FINANCIAL STATEMENT PRESENTATION AND ACCOUNTING POLICIES
- ------- --------------------------------------------------------
The financial statements of the subsidiary have been prepared
based on criteria consistent with those applied by Buenos
Aires Energy Company S.A. for preparing its financial
statements.
In addition, the principal valuation and disclosure criteria
used for preparing the consolidated financial statements of
the subsidiary at December 31, 1997, which have not been
explained in the note on accounting policies of the
Controlling Company, are as follows:
a. Investments
-----------
These correspond to units in mutual funds, which have
been valued at their quotation value at closing date.
<PAGE> 7
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2: (Continued)
- -------
b. Other receivables
-----------------
These include, among others, the following:
- Receivables for the supply of electricity
not transferred to EDEA S.A. and for which
negotiations have been initiated with the
Ministry of Works and Public Services of the
Province of Buenos Aires, as mentioned in
Note 5 to the consolidated financial
statements. Only for accounting purposes,
these receivables have been disclosed at a
value of Pesos 1.
- Restricted savings and checking account
balances, deposited with Banco Credito
Provincial, as mentioned in Note 22 to the
consolidated financial statements.
c. Fixed assets
------------
The value of the fixed assets transferred to EDEA
S.A. for the rendering of public utility services has
been determined considering the purchase price paid
by the majority shareholder (Buenos Aires Energy
Company Sociedad Anonima) for the capital stock, less
the assets and liabilities transferred by the
Licensor, as mentioned in Note 4 to the consolidated
financial statements.
EDEA S.A. has entrusted independent experts with the
analysis of the classification, specific appraisal
and remaining useful life of each of the fixed
assets.
Additions carried out subsequently have been
disclosed in constant currency values.
The values thus determined are disclosed net of their
corresponding accumulated depreciation calculated
based on the straight-line method, taking the
estimated useful lives of the assets.
<PAGE> 8
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2: (Continued)
Materials and spare parts in stock at closing date,
considered as fixed assets, were valued at their
replacement cost as at such date. Consumption of such
assets is included in the cost of sales for the year
in which they were used up.
The value of the Fixed Assets, taken as a whole, does
not exceed their estimated recoverable value, as
disclosed by business projections taken as a whole.
d. Intangible assets
-----------------
This caption includes the following items:
- EDEA S.A.'s obligation to bear certain costs
and/or expenses, in accordance with the
License agreement.
- Pre-operating and organization expenses of
EDEA S.A.
- Labor commitments with EDEA S.A.'s personnel
determined through actuarial estimates, as
described in Note 20 to the consolidated
financial statements.
- Systems development expenses.
Intangible assets will be amortized based on the
straight-line method over fifteen years calculated on
a monthly basis, considering the first management
period, mentioned in Note 11 to the consolidated
financial statements. Systems development expenses
will be amortized based on the straight-line method
over three years.
Additionally, this caption includes the following
items:
<PAGE> 9
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2: (Continued)
- -------
- Payment made for Consulting work and
expenses engaged for purposes of the Public
International Bid for the purchase of the
Share Capital of Empresa Distribuidora de
Energia Atlantica Sociedad Anonima -
#11.3.j. of the Terms and Conditions for the
Bid. These expenses are amortized under the
straight-line method over fifteen years
calculated on a monthly basis, considering
the first management period mentioned in
Note 11 to the consolidated financial
statements.
- Other expenses relating to the International
Public Bid mentioned above, in addition to
those provided for in #11.3.j. of the Term
and Conditions for the Bid, which are
amortized under the same method and over the
same period.
- Other expenses relating to the bridge loan
granted by Citibank N.A. Bahamas Branch to
make the irrevocable contribution to EDEA
S.A. - Note 7 to the consolidated financial
statements. These expenses are amortized in
line with the straight-line method, over the
period of life of the negotiable bonds
program (5 and 7 years), which replaced the
loan mentioned, considered on a monthly
basis.
- Expenses connected with the issuance of the
Negotiable Bonds - Note 9 -. These expenses
are amortized in line with the straight-line
method, over the life of the negotiable
bonds program (5 and 7 years), considered on
a monthly basis.
NOTE 3: BREAKDOWN OF BALANCE SHEET CAPTIONS
- ------- -----------------------------------
Balance Sheet
-------------
As at December 31, 1997, the breakdown of balance sheet
captions is as follows:
<PAGE> 10
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: (Continued)
- -------
a. Cash and Banks
--------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
Cash 16,282
Imprest fund 25,310
Funds collected to be deposited 110,841
Banks 1,082,037
Bank in foreign currency (Schedule G) 24,144
---------------------
TOTAL 1,258,614
=====================
</TABLE>
b. Trade receivables
-----------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
CURRENT
Trade debtors 37,151,393
Energy supplied pending invoicing 18,203,567
Others 6,786,665
---------------------
SUBTOTAL 62,141,625
less: Allowance for bad debtors (Schedule E) (21,239,847)
---------------------
SUBTOTAL 40,901,778
---------------------
NON-CURRENT
Trade liabilities 1,363,136
---------------------
SUBTOTAL 1,363,136
---------------------
TOTAL 42,264,914
=====================
</TABLE>
<PAGE> 11
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: (Continued)
- -------
c. Other receivables
-----------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
CURRENT
Documents with first maturity following 403,288
April 1, 1997 (less than 60-day default as
at June 2, 1997)
Non-transferred documents included in 873,695
Circular No. 88 of the Terms of Reference
and Conditions
Miscellaneous 12,000
---------------------
SUBTOTAL (NOTE 5) 1,288,983
Allowance for defaulting receivables (1,288,982)
(Schedule E)
---------------------
SUBTOTAL 1
---------------------
Employees Stock Ownership Plan 905,839
VAT credit balance 357,971
Miscellaneous advance payments 188,842
Intercompany receivables (EdERSA) 69,434
Receivables from the staff 539,790
Banco Credito Provincial (Note 22) 713,268
Other receivables 648,745
---------------------
SUBTOTAL 3,423,890
---------------------
NON-CURRENT
Loans to personnel 161,749
Employee Stock Ownership Plan 39,494,261
Banco Credito Provincial (Note 22) 1,664,291
Allowance for bad debtors (Note 22 and (356,633)
Schedule E)
---------------------
SUBTOTAL 40,963,668
---------------------
TOTAL 44,387,558
=====================
</TABLE>
<PAGE> 12
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: (Continued)
- -------
d. Commercial liabilities
----------------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
In local currency
Suppliers 6,355,777
Allowance for invoices to be received 5,315,880
---------------------
SUBTOTAL 11,671,657
---------------------
In foreign currency (Schedule G)
Suppliers 5,580,888
Allowance for invoices to be received 1,957,508
---------------------
SUBTOTAL 7,538,396
---------------------
TOTAL 19,210,053
=====================
</TABLE>
e. Bank and financial loans
------------------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
CURRENT
In foreign currency (Schedule G)
Citibank 4,350,000
Banco Rio de la Plata 7,440,000
Banco Provincia de Buenos Aires 1,215,000
Accrued interest 5,614,262
---------------------
SUBTOTAL 18,619,262
---------------------
NON-CURRENT
Negotiable Bonds (Note 9 and Schedule G) 230,000,000
---------------------
TOTAL 248,619,262
=====================
</TABLE>
<PAGE> 13
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: (Continued)
- -------
f. Intercompany liabilities
------------------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
CURRENT
CNG International Corporation (Note 8 and 424,183
Schedule G)
Loma Negra S.A. (Note 8 and Schedule G) 424,183
United Utilities International Ltd. (Note 748,558
8 and Schedule G)
Camuzzi Argentina S.A. 1,110,103
Camuzzi Argentina S.A. (Note 8 and 1,272,548
Schedule G)
Camuzzi Gas Pampeana S.A. 88,555
Central Piedrabuena S.A. (Schedule G) 1,610,728
United Utilities International Argentina 1,044,663
S.A.
United Utilities International Ltd. 25,448
(Schedule G)
---------------------
SUBTOTAL 6,748,969
---------------------
NON-CURRENT
Camuzzi Argentina S.A. (Note 8 and 1,836,000
Schedule G)
CNG International Corporation (Note 8 and 612,000
Schedule G)
Loma Negra S.A. (Note 8 and Schedule G) 612,000
United Utilities International Ltd. (Note 1,080,000
8 and Schedule G)
---------------------
SUBTOTAL 4,140,000
---------------------
TOTAL 10,888,969
=====================
</TABLE>
g. Social security liabilities
---------------------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
Salaries payable 25,543
Social security charges payable 988,192
Accrued vacations 1,489,914
Allowance for annual bonus based on 1,338,026
efficiency
Allowance for tourism assignment 51,963
---------------------
TOTAL 3,893,638
=====================
</TABLE>
<PAGE> 14
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: (Continued)
- -------
h. Tax payables
------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
National taxes
Law 23,681 82,646
Income tax 1,692,994
---------------------
SUBTOTAL 1,775,640
---------------------
Provincial taxes
Law 7,290 947,515
Law 9,038 520,405
Law 11,769 587,149
Gross revenue tax 148,639
---------------------
SUBTOTAL 2,203,708
---------------------
Municipal taxes
Law 11,769 Section 72/Ter. 1,659,298
Law 10,740 1,469,107
---------------------
SUBTOTAL 3,128,405
---------------------
TOTAL 7,107,753
=====================
</TABLE>
i. Other liabilities
-----------------
<TABLE>
<CAPTION>
(Pesos)
---------------------
<S> <C>
CURRENT
Labor commitment towards personnel (Note 34,301
20)
Inspection and control rate 586,187
Miscellaneous 476,644
---------------------
SUBTOTAL 1,097,132
---------------------
NON-CURRENT
Labor commitment towards personnel (Note 1,755,155
20)
Miscellaneous 2,000
---------------------
SUBTOTAL 1,757,155
---------------------
TOTAL 2,854,287
=====================
</TABLE>
<PAGE> 15
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4: FIXED ASSETS TRANSFERRED
- ------- ------------------------
According to the Terms of Reference and Conditions for the
International and National Public Bid called for all the
shares of Empresa Distribuidora de Energia Atlantica S.A. and
the License Agreement, the fixed assets transferred by the
Licensor to EDEA S.A. include, among others, Properties,
Vehicles, Transformation Stations, Works in Progress,
Materials and Spare Parts and any other assets necessary for
the rendering of the public utility service existing at the
moment in which EDEA S.A. started its operations.
These assets shall only be used in connection with the
rendering of the public utility service, and shall be
transferred to the Province of Buenos Aires upon expiration of
the License.
Empresa Distribuidora de Energia Atlantica S.A. has entrusted
independent experts with the analysis of the appraisal of such
assets, as well as the determination of the remaining useful
life thereof; as at the closing date of these financial
statements such analysis was in progress. The individual
accounting values of the fixed assets received by EDEA S.A.
shall be determined based on this analysis.
NOTE 5: OTHER RECEIVABLES NOT TRANSFERRED
- ------- ---------------------------------
The subsidiary (EDEA S.A.) has started negotiations with the
Ministry of Works and Public Services of the province of
Buenos Aires, with respect to certain receivables for energy
supply and others which should have been transferred, as
construed by EDEA S.A. from the Share Transfer Agreement dated
June 2, 1997.
EDEA S.A. has accounted for such receivables, whose face value
amounts to pesos 1,288,983, as described in Note 3.c to the
consolidated financial statements.
<PAGE> 16
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6: EMPLOYEE STOCK OWNERSHIP PROGRAM
- ------- --------------------------------
Ordinary Class C shares of EDEA S.A., representing 10% of its
capital stock, were transferred to Inversora Electrica de
Buenos Aires to be held by Banco de la Provincia de Buenos
Aires as trustee, until the Employee Stock Ownership
Participation Program is implemented with them.
Pursuant to Chapter XII of the Terms of Reference and
Conditions and to Clause Nine of Circular No. 36 for the
privatization of EDEA S.A., the employees of such Company who
elect to participate in the Stock Ownership Program shall pay
the purchase price of Ordinary Class C shares to the
Licensees, with the full amount of annual dividends
corresponding to such shares, net of the Trustee's fees and
the creation of a Guarantee and Repurchase Fund.
Accordingly, the recording of such receivable as current and
non-current was made based on the projection of dividends to
be distributed by EDEA S.A..
NOTE 7: BRIDGE LOAN TO THE CONTROLLED COMPANY
- ------- -------------------------------------
On May 28, 1997, Citibank N.A. Bahamas granted a "bridge loan"
for U.S.$200,000,000 to IEBA S.A. until the issuance of
Negotiable Bonds mentioned in Note 9, to be used for the
payment of the License granted by the Province of Buenos Aires
to EDEA S.A..
This loan, plus the corresponding interest, was settled with
the proceeds of the issuance of Negotiable Bonds on September
24, 1997, as mentioned in Note 9 and 24 to the consolidated
financial statements.
NOTE 8: LOANS FROM THE SHAREHOLDERS OF THE CONTROLLED COMPANY
- ------- -----------------------------------------------------
On May 27, 1997, IEBA S.A. requested the financial assistance
of its shareholders, pro rata to their shareholdings, for the
payment of the price balance of the shares in Empresa
Distribuidora de Energia Atlantica S.A.. The amounts obtained
were as follows:
<PAGE> 17
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8: (Continued)
- -------
Buenos Aires Energy Company S.A. U.S.$ 16,500,000 (1)
United Utilities International Limited U.S.$ 13,500,000
(1) Amount contributed by the shareholders of BAECO
(Camuzzi Argentina S.A., CNG International
Corporation and Loma Negra S.A.) in proportion to
their share holdings.
These loans were partially settled with the proceeds of the
issuance of Negotiable Bonds mentioned in Note 9 to the
consolidated financial statements and the balance was
renegotiated as follows:
Loan from United Utilities International Limited for U.S.
---------------------------------------------------------
$ 13,500,000
------------
- U.S.$ 9,450,000 plus interest were settled on
September 24, 1997, with the proceeds of the
Negotiable Bonds.
- U.S.$ 2,250,000 were allocated to an irrevocable
contribution.
- U.S.$ 1,800,000 were refinanced in 5 semiannual
installments of U.S.$ 360,000 each, due as from March
31, 1998. Interest rate: LIBO, 180-day rate.
Loan from the shareholders of BAECO S.A. for U.S.$ 16,500,000
-------------------------------------------------------------
- U.S.$ 11,400,000 plus interest were settled on
October 1, 1997, with the proceeds of the Negotiable
Bonds.
- U.S.$ 5,100,000 were refinanced in 5 semiannual
installments of U.S.$ 1,020,000 each, maturing on
March 31, 1998. Interest rate: LIBO, 180-day rate.
The loans mentioned above outstanding at December 31, 1997,
plus interest, are disclosed in the consolidated financial
statements as current and non-current loans in accordance with
the renegotiations described above.
<PAGE> 18
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: ISSUANCE OF NEGOTIABLE BONDS
- ------- ----------------------------
On September 24, 1997, IEBA S.A. issued Negotiable Bonds
not convertible into shares, under the Negotiable Bond Program
approved by the CNV through Resolutions Nos. 11,880 and 11,898
dated September 8 and September 18, respectively.
The conditions of the issuance were as follows:
<TABLE>
<S> <C>
Class A securities
. Face value: U.S.$ 100,000,000
. Annual interest rate: 8.65% payable semi-annually in arrears
. Maturity of principal: September 16, 2002.
Class B securities
. Face value: U.S.$ 130,000,000
. Annual interest rate: 9.00%, payable semi-annually in arrears
. Maturity of principal: September 16, 2004.
</TABLE>
The main restrictions under the conditions for the issuance of
the Negotiable Bonds are the following:
Limitation on Additional indebtedness: The Issuer shall not,
create, incur, assume or issue either, directly or indirectly,
guarantee or in any manner become, either directly or
indirectly, liable for or with respect to it ("incur") or
tolerate any Indebtedness (including the Acquired
Indebtedness), except for Indebtedness falling within at least
one of the following categories:
(i) Indebtedness under the Securities and the Trust Agreement;
(ii) Indebtedness of the Issuer and of the Restricted
Subsidiaries outstanding at the Issue Date after giving effect
to the application of the proceeds of the sale of Securities;
(iii) Indebtedness of the Issuer or of any Restricted
Subsidiary; provided that, following such Indebtedness and
after giving effect thereto, (a) no Default or Event of
Default shall have occurred and be continuing, (b) the
Consolidated EBITDA Coverage Ratio of the
<PAGE> 19
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: (Continued)
- -------
Issuer determined on a pro forma basis, for the last four
fiscal quarters, taken as a whole, and assuming such
Indebtedness had been incurred on the first day of such fourth
quarter, had been at least 2.0 to 1.0; (iv) the Indebtedness
incurred between the Issuer and any Restricted Subsidiary; (v)
Indebtedness incurred in Interest Rate Agreements or Currency
Agreements entered into with the purpose of hedging the
fluctuations of interest rates or currency with respect to
such Indebtedness and not for speculation purposes; (vi) (a)
the Indebtedness of the Issuer regarding (1) the purchase
price of the property acquired in the ordinary course of
business or (2) obligations under other transactions related
to capital investments; and (b) additional Indebtedness of
EDEA provided that (x) such Indebtedness is assumed in
relation to EDEA's business and operations, (y) such
Indebtedness is not incurred in relation to a Permitted
Investment under subsections (vi) or (vii) of the
corresponding definition; and (z) immediately after the
assumption of an Indebtedness and after giving effect thereto,
the ratio (A) of the aggregate sum of EDEA's Total
Consolidated Indebtedness plus any Indebtedness of the Issuer
then incurred pursuant to subsection (a) above, to (B) EDEA's
Total Consolidated Capitalization, does not exceed 0.40 to
1.00; and (vii) the replacements, renewals, refinancing and
extensions of the Indebtedness described in clauses (i)
through (vii) above; provided, however, that any such
replacements, renewals, refinancing and extension (a) shall
not provide for any mandatory redemption, amortization or
sinking fund requirement in an amount in excess of the amounts
or at a date prior to the dates specified in the Indebtedness
being replaced, renewed, refinanced or extended, and (b) shall
not exceed the principal amount (plus accrued interest,
prepayment premium and costs of operations, if any) of the
Indebtedness.
Limitation on Restricted Payments: The Issuer shall not make,
and shall not permit any of the Restricted Subsidiaries to,
directly or indirectly, make any Restricted Payment unless:
<PAGE> 20
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: (Continued)
- -------
(i) no Default or Event of Default had occurred and be
continuing at the time or after giving effect to such
Restricted Payment; (ii) (A) up to September 30, 2000, the
Consolidated EBITDA Coverage Ratio is at least 1.75 to 1.0 and
(B) thereafter the Issuer may incur an additional Indebtedness
of U.S.$1.00 pursuant to clause (iii) of the "Limitation on
Additional Indebtedness" covenant; and (iii) immediately after
giving effect to such Restricted Payment, the aggregate of all
Restricted Payments declared or made after the Issue Date does
not exceed the sum of: (a) the difference between the sum of
(1) 100% of cumulative Consolidated EBITDA (or if such
consolidated cumulative EBITDA is negative, less 100% of such
amount) and (2) the result of multiplying 1.5 times the
Consolidated Net Interest Expense, in each instance calculated
for the fiscal year (taken as one accounting period) commenced
on June 2, 1997 and ended on the last day of the last full
fiscal quarter immediately preceding such Restricted Payment
for which quarterly or annual financial statements of the
Issuer are available, and (b) 100% of the aggregate Net
Proceeds received by the Issuer from the issuance or sale,
after the Issue Date, of Capital Stock (other than
Disqualified Capital Stock) of the Issuer or any Indebtedness
or other securities of the Issuer convertible into Capital
Stock (other than Disqualified Capital Stock) or exercisable
or exchangeable for Capital Stock of the Issuer which have
been so converted, exercised or exchanged, as the case may be.
For purposes of determining the amounts expended for
Restricted Payments, cash distributed shall be valued at the
face value thereof and property other than cash shall be
valued at its Fair Market Value.
Notwithstanding the foregoing, the Company may make Permitted
Payments.
"Permitted Payments" include:
<PAGE> 21
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: (Continued)
- -------
(x) the payment of any dividend within 60 calendar days after
the date of declaration thereof, if at such date of such
declaration the payment complied with the provisions of the
Trust Agreement, (y) the withdrawal of any Capital Stock or
Subordinated Indebtedness of the Issuer or of any Restricted
Subsidiary by conversion into or by exchange for, shares of
Capital Stock of the Issuer or of any Restricted Subsidiary
(other than Disqualified Capital Stock), or out of the
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Issuer) of Capital Stock (other
than Disqualified Capital Stock) of the Issuer; and (z) the
withdrawal of any Subordinated Indebtedness of the Issuer by
exchange for or out of the proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary) of
Subordinated Indebtedness of the Issuer permitted to be
incurred in accordance with the "Limitation on Additional
Indebtedness" covenant herein.
In determining the amount of Restricted Payments permissible
under clause (iii) above, amounts expended pursuant to clauses
(x), (y) and (z) in the preceding paragraph shall be included
as Restricted Payments.
Limitation on liens. The Issuer shall not, whether indirectly
or directly, and shall not permit any of its Restricted
Subsidiaries to create, incur, assume or suffer to exist any
Lien (other than a Permitted Lien) of any kind upon any of
their respective property or assets now owned or hereafter
acquired (including any Capital Stock) or proceeds therefrom
securing any Indebtedness, unless the Securities and all the
amounts due under the Trust Agreement are equally and ratably
secured by such Lien upon such property, assets or proceeds,
together with (or prior to, in the event the obligation or
liability to be secured with such a Lien were a Subordinate
Indebtedness) the obligation or liability secured by such
Lien.
Ownership of voting stock of EDEA. The Issuer shall at all
times maintain ownership of at least 90% of the securities of
EDEA entitled to vote.
In addition to the aforementioned restrictions, there are
other restrictions related to the following:
<PAGE> 22
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: (Continued)
- -------
Limitation on dividends and other payment restrictions
affecting the Subsidiaries.
Disposal of the proceeds of sales of assets.
Limitation on transactions with affiliates.
Limitation on consolidations, mergers by absorption and sales
of assets.
Limitation on designation of unrestricted Subsidiaries.
NOTE 10: CALCULATION OF THE CONSOLIDATED EBITDA
- -------- --------------------------------------
In accordance with the commitments under the issuance of
Negotiable Bonds, the breakdown of the calculation of the
EBITDA shall be the following:
<TABLE>
<S> <C> <C>
NET CONSOLIDATED LOSS (508,446)
PLUS:
Income tax 1,690,721
Financial income 13,001,662
Amortizations 7,169,616
Minority interest 1,121,782
Extraordinary income 320,970 23,304,751
--------------------- --------------------
LESS:
Dividends from the -
minority interest (Net
of corresponding
payments received from
the PPAP)
Financial loss (1,937,865)
Amortization of -
negative goodwill
Extraordinary loss - (1,937,865)
--------------------- --------------------
20,858,440
====================
</TABLE>
<PAGE> 23
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11: MANAGEMENT PERIOD OF EDEA S.A.
- -------- ------------------------------
In accordance with the provisions of Sections 6 through 12 of
the License Agreement, the term thereof shall be divided into
management periods. The first period shall extend for fifteen
years, as from takeover, and the remaining eight periods shall
be for ten years each, as from the end of the preceding
management period.
At least six months prior to the end of each management
period, Inversora Electrica de Buenos Aires S.A. shall be able
to sell its holding of Class A shares of the Licensee -EDEA
S.A.- through an International Public Bidding called for by
the Ministry of Works and Public Services of the Province of
Buenos Aires.
NOTE 12: SECURITIES GRANTED BY THE CONTROLLED COMPANY
- -------- --------------------------------------------
In compliance with section 38 of the License Agreement, Class
A Shares of EDEA, owned by Inversora Electrica de Buenos Aires
S.A., are pledged in security for the performance of the
obligations undertaken thereunder, under the following terms
and conditions:
* The pledged Class A shares shall be delivered to the
Licensor.
* The holders of Class A shares shall undertake the
obligation to increase this security by creating a
similar pledge on any Class A shares acquired
thereafter by the Licensee, as a result of new
capital contributions or capitalization of profits
and/or balances of capital adjustments and/or share
dividends.
* The pledge thus created shall be maintained during
the term of the License and such lien shall survive
the succeeding transfers of Class A shares.
<PAGE> 24
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13: RESTRICTIONS ON THE TRANSFER OF SHARES
- -------- --------------------------------------
According to Section 16 of the License Agreement, Inversora
Electrica de Buenos Aires S.A., as majority shareholder of the
Class A shares of EDEA, shall not modify its holding of such
shares or sell then for five (5) years as from the date of the
enforcement of the License Agreement (June 2, 1997). Following
such five-year period, Inversora Electrica de Buenos Aires
S.A. shall be able to modify or sell its shareholding, prior
authorization of the Relevant Authority.
Pursuant to Section 16 in fine of the License agreement and to
Section 9 of the By-laws, the shareholders of Inversora
Electrica de Buenos Aires S.A. are restricted over a five-year
period as from the enforcement of the License (June 2, 1997)
from modifying their holding of such shares or selling the
shares of such Investment Company by a proportion and amount
exceeding FORTY NINE PERCENT (49%) of their respective
shareholdings of the Investment Company. Following such
five-year period, the shareholders will be allowed to dispose
of their shareholdings upon prior notice to the Provincial
Executive Power through the Relevant Authority, as provided
for in Provincial Law No. 11,769.
In addition, the technical operator of EDEA S.A. shall not,
over a five-year period as from the takeover (June 2, 1997)
modify his holding of such shares or sell its Class A shares
by a proportion and amount exceeding 39.20% of the total
shares representing the capital stock of the Company.
Following such five-year period, EDEA S.A. shall be able to
modify its shareholding or sell its Class A Shares subject to
the ordinary regulations set forth in connection with any of
the Company's shareholders.
NOTE 14: ASSETS RECEIVED IN COMMODATUM
- -------- -----------------------------
The Ministry of Public Works and Services of the Province of
Buenos Aires has lent in commodatum to EDEA S.A. for the term
of one year, certain Properties not considered essential for
the supply of the public service, granting a lease and/or
purchase option on them to Empresa Distribuidora de Energia
Atlantica S.A. at the end of such commodatum.
<PAGE> 25
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15: FORWARD CONTRACTS
- -------- -----------------
At December 31, 1997, EDEA S.A. has energy sale forward
contracts, some of which were received as a result of the
privatization process, as follows:
- 30 contracts with cooperatives, maturing on year
2001,
- 19 contracts with large customers maturing between
1998 and year 2000.
NOTE 16: INVESTMENTS AND ELECTRIC ENERGY SUPPLY SYSTEM
- -------- ---------------------------------------------
It is EDEA S.A.'s responsibility to make the necessary
investments to ensure the rendering of the public service in
conformity with the quality levels set in the license
agreement, as well as to execute block energy purchase and
sale contracts that it considers necessary to cover the
current and future demand within the licensed area, in
addition to the energy purchase and sale contracts with
Central Termica San Nicolas S.A. and the cold reserve contract
with Eseba Generacion and Eseba S.A. or their predecessors,
which are a requirement of the license, and the lack of supply
cannot be given as a reason to be exempt from the
responsibility concerning its obligation to provide the
service.
NOTE 17: ADJUSTMENTS TO BALANCES TRANSFERRED AT START-UP
- -------- -----------------------------------------------
At the time of the transfer of assets and liabilities, the
controlled company received indirectly certain receivables,
principally from the municipalities within the licensed area,
which should have not been transferred to EDEA, as ESEBA had
exercised the rights to dispose of them before.
During the current financial year, EDEA S.A. has given
accounting recognition to this situation and adjusted its
trade accounts receivable of $ 793,772 with a balancing entry
in the Fixed Assets transferred, which were determined
considering the amount paid by the majority shareholder
(Inversora Electrica de Buenos Aires S.A.) to acquire the
equity in it, less the assets and liabilities transferred by
the licensor, as mentioned in Note 2.c. to the consolidated
financial statements.
<PAGE> 26
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18: RESTRICTIONS ARISING FROM THE LICENSE AGREEMENT
- -------- -----------------------------------------------
The rights and obligations of EDEA S.A. arising from the
license agreement may not be assigned to any third party
without the prior consent of the Provincial Executive Power.
However, the prior consent of the Provincial Executive Power
shall not be necessary to assign to a third party, for the
purpose of granting a security, the economic rights arising
from the actual rendering of the utility service regarding
which the Licensee is entitled to render pursuant to the
license agreement.
NOTE 19: RESTRICTED ASSETS
- -------- -----------------
EDEA S.A. shall be forbidden to create any mortgage, pledge,
lien or security interest in favor of third parties upon the
assets essential for the service. Notwithstanding the
foregoing, EDEA S.A. shall dispose without restrictions of
those assets which in the future may be deemed inadequate or
unnecessary for such purpose. This restriction shall not
extend to the creation of real property rights granted by EDEA
S.A. upon an asset at the moment of its acquisition, as a
security for the compliance of the payment of the purchase
price.
NOTE 20: LABOR COMMITMENTS TOWARDS EDEA S.A.'S PERSONNEL
- -------- -----------------------------------------------
In accordance with the provisions of Section 26 of the
Collective Bargaining Agreement, every employee availing of
the pension benefit plan, as well as his beneficiaries, in the
case of employees who may have died while rendering services,
shall be granted a bonus based on his monthly remuneration and
seniority.
According to the foregoing, the total cost recorded under
income for the period, based on actuarial estimates, is made
up of the following items:
<TABLE>
<CAPTION>
(Pesos)
--------------------
<S> <C>
Costs of services 97,462
Interest costs 58,019
Amortization of initial commitment 96,698
--------------------
Total 252,179
====================
</TABLE>
<PAGE> 27
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 20: (Continued)
- --------
where Costs of Services represent the current estimated
actuarial value of the portion of indemnity attributable to
the year, Interest Cost corresponds to the interest on the
Projected Commitment and the Amortization is the portion
corresponding to the Initial Liabilities at June 2, 1997,
which amounted to Pesos 2,435,196, to be amortized in 15 equal
annual installments.
At December 31, 1997, the Projected Commitment has been
calculated in a total of Pesos 2,520,064 and the Cumulative
Commitment (current actuarial value of the portion of
indemnity attributable to past services) totalled Pesos
1,789,456.
Considering that the Cumulative Commitment should be disclosed
as a minimum, the Minimum Additional Liabilities are recorded
as a counterpart under the Intangible Assets account, for a
total of Pesos 1,592,338 at December 31, 1997.
NOTE 21: FINANCIAL INCOME/(LOSS)
- --------
<TABLE>
<CAPTION>
(Pesos)
--------------------
<S> <C>
GENERATED BY ASSETS
Interest 128,404
Surcharges for late payment 1,442,316
Quotation differences and others 37,758
--------------------
SUBTOTAL 1,608,478
--------------------
GENERATED BY LIABILITIES
Bank fees and expenses (169,187)
Interest on financial transactions and others (12,535,001)
Exchange differences (31,931)
--------------------
SUBTOTAL (12,736,119)
--------------------
TOTAL (11,127,641)
====================
</TABLE>
<PAGE> 28
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 22: RESTRICTION ON FUNDS
- -------- --------------------
The Argentine Central Bank (the "BCRA") resolved, under
Resolution No. 365 dated August 20, 1997, the complete
suspension of the transactions of Banco Credito Provincial
S.A., except for those transactions related to the Central
Bank derived from monetary regulation and/or exchange
transactions; transactions related to purchase and credit
cards existing as at such date; credit collection
transactions, mere custody administrative transactions or
those related to the compliance with labor, social security or
fiscal obligations; and the payment of pension and survivors'
benefits with funds provided by the National Administration of
Social Security.
In addition, on December 18, 1997, the BCRA through Resolution
No. 741 authorized the group of large depositors of Banco
Credito Provincial S.A., to integrate a retail commercial bank
named Mercobank S.A., created pursuant to the provisions of
section 7 of the Financial Entities Law.
EDEA S.A.'s funds deposited with such Bank, at December 31,
1997, amount to Pesos 51,296 in the Savings Account and Pesos
2,326,263 in the Checking Account, as disclosed under the
"Other Receivables" account, classified in current and
non-current, depending on the time in which EDEA S.A.
considers it shall collect the above-mentioned amounts. The
Company expects to collect approximately 30% in cash, 40% in
shares and the remainder in Class C bonds, representing the
loan portfolio of Banco Credito Provincial S.A..
EDEA S.A. has decided to make a Pesos 356,633 allowance with a
counterpart under Extraordinary income. Said allowance
represents the doubtful recovery of the value of Class C bonds
to be received by the Company in the future.
<PAGE> 29
BUENOS AIRES ENERGY COMPANY S.A.
AND ITS SUBSIDIARY COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 23: INTERCOMPANY TRANSACTIONS
- -------- -------------------------
As at December 31, 1997, intercompany transactions were as
follows:
<TABLE>
<CAPTION>
(Pesos)
--------------------
<S> <C>
Transactions Loss/(Income)
Camuzzi Gas Pampeana S.A. 15,687
Camuzzi Gas Pampeana S.A. (29,981)
Camuzzi Argentina S.A. 1,855,001 (1)
Central Piedra Buena S.A. 1,225,917
Loma Negra S.A. 81,633
CNG International Corporation 81,633
Empresa de Energia Rio Negro S.A. (57,383)
United Utilities International Argentina S.A. 1,222,969
United Utilities International Ltd. 971,307 (2)
</TABLE>
(1) Includes Pesos 796,972 capitalized under Intangible
Assets.
(2) Includes Pesos 675,000 capitalized under Intangible
Assets.
NOTE 24: ALLOCATION OF FUNDS OBTAINED FROM THE ISSUANCE OF NEGOTIABLE
- -------- ------------------------------------------------------------
BONDS
-----
The final allocation of the funds obtained from the placement
of Negotiable Bonds (Note 9 to the consolidated financial
statements) is described below for information purposes:
<TABLE>
<CAPTION>
U.S.$ U.S.$
------------------------------------------
<S> <C> <C>
Funds from the 230,000,000
issuance of Negotiable
Bonds
Issuance fee (3,125,000)
---------------------
Net income 226,875,000
Payment of bridge loan
- Citibank Nassau
Principal 200,000,000
Interest 4,873,611 (204,873,611)
---------------------
Fees for services (625,198)
Payment of loans from
Shareholders
Buenos Aires Energy 11,877,250
Company S.A.
United Utilities 9,717,750 (21,595,000)
International LTD
---------------------
Difference paid with 218,809
the Company's funds
---------------------
Net proceeds -
=====================
</TABLE>
<PAGE> 30
BUENOS AIRES ENERGY COMPANY S.A. AND ITS SUBSIDIARY
FIXED ASSETS
For the non-annual fiscal period commenced February 20, 1997 and ended
December 31, 1997
SCHEDULE A
<TABLE>
<CAPTION>
==============================================================================
OPENING VALUE
-------------------------------------------------------------
Item Additions for Transfers Deletions(1) Value at end
the period Pesos Pesos of period
Pesos Pesos
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed assets 401,419,630 -- -- 401,419,630
transferred
(Note 4)
Materials and 10,971,828 (1,542,135) 1,101,915 8,327,778
spare parts
Tools 117,104 -- -- 117,104
Computer 588,709 -- -- 588,709
equipment
Communication 56,296 -- -- 56,296
equipment
Furniture and 170,000 -- -- 170,000
office equipment
Vehicles 297,776 -- -- 297,776
Works in 2,202,413 1,542,135 -- 3,744,548
progress
Land 323,873 -- -- 323,873
Buildings 906,127 -- -- 906,127
-------------------------------------------------------------
Total at 417,053,756 -- 1,101,915 415,951,841
December 31,
1997
==============================================================================
<CAPTION>
=========================================================================================
DEPRECIATION
-------------------------------------------------------------------------
Current period
-------------------------------------------
Item Rate Amount(2) Deletions Accumulated Net carrying
% Pesos Pesos at end of value
period Pesos
Pesos
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fixed assets 2.5 5,854,036 -- 5,854,036 395,565,594
transferred
(Note 4)
Materials and -- -- -- -- 8,327,778
spare parts
Tools 33.33 4,934 -- 4,934 112,170
Computer 33.33 54,366 -- 54,366 534,343
equipment
Communication 33.33 3,113 -- 3,113 53,183
equipment
Furniture and 20.00 2,834 -- 2,834 167,166
office equipment
Vehicles 20.00 10,996 -- 10,996 286,780
Works in -- -- -- -- 3,744,548
progress
Land -- -- -- -- 323,873
Buildings 2.00 1,510 -- 1,510 904,617
-------------------------------------------------------------------------
Total at -- 5,931,789 -- 5,931,789 410,020,052
December 31,
1997
=========================================================================================
<FN>
Note:
(1) Includes Pesos 970,526 on account of materials and spare parts used up and
Pesos 131,389 on account of other expenses.
(2) Included in Schedule H.
</TABLE>
<PAGE> 31
BUENOS AIRES ENERGY COMPANY S.A.
INTANGIBLE ASSETS
For the non-annual fiscal period commenced February 20, 1997 and ended
December 31, 1997
SCHEDULE B
<TABLE>
<CAPTION>
====================================================================================================================================
Opening value Depreciation
------------------------------------------------------------------------------------------------------------
For the period
----------------------------------
Principal Account Additions for the Value at end of Rate Amount(1) Accumulated at Net book value
period period % end of period (Pesos)
(Pesos) (Pesos) (Pesos)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-operating and 1,903,006 1,903,006 6.67 59,977 59,977 1,843,029
organization expenses
Consulting fees and 5,765,495 5,765,495 6.67 224,215 224,215 5,541,280
other expenses re.
international public
bidding for the
purchase of EDEA S.A's
shareholding
Expenses re. the issue 4,381,288 4,381,288 20.00/14.30 244,917 244,917 4,136,371
of Negotiable Bonds
Expenses re. Loan from 4,636,232 4,636,232 20.00/14.30 434,817 434,817 4,201,415
Citibank
Costs and Expenses 3,424,095 3,424,095 6.67 113,826 113,826 3,310,269
assumed under the
License Agreement
Labor undertakings as 1,733,370 1,733,370 - 141,032 141,032 1,592,338
per Section 26
Collective Bargaining
Agreement (Note 20)
Systems development 500,767 500,767 33.33 19,043 19,043 481,724
------------------------------------------------------------------------------------------------------------
Total at December 31, 22,344,253 22,344,253 - 1,237,827 1,237,827 21,106,426
1997
====================================================================================================================================
<FN>
Note:
(1) Pesos 1,096,795 for Amortization of Intangible Assets and Pesos 141,032 are
included under Salaries and Wages in Schedule H.
</TABLE>
<PAGE> 32
BUENOS AIRES ENERGY COMPANY S.A.
Consolidated Balance Sheet at December 31, 1997
INVESTMENTS
SCHEDULE C
<TABLE>
<CAPTION>
================================================================================
ITEM BOOK VALUE
(Pesos)
- --------------------------------------------------------------------------------
<S> <C>
CURRENT INVESTMENTS
Mutual fund
Provinfondos 1,524,608
---------------------
TOTAL CURRENT INVESTMENTS 1,524,608
---------------------
TOTAL AT DECEMBER 31, 1997 1,524,608
================================================================================
</TABLE>
<PAGE> 33
BUENOS AIRES ENERGY COMPANY S.A.
ALLOWANCES
For the non-annual fiscal period commenced February 20, 1997 and ended
December 31, 1997
SCHEDULE E
<TABLE>
<CAPTION>
==============================================================================================
Item Additions for Deletions Net book value
the period (1) (Pesos) (Pesos)
(Pesos)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DEDUCTED FROM ASSETS
Allowance for trade 21,278,242 38,395 21,239,847
receivables
Allowance for other 1,645,615 1,645,615
receivables
----------------------------------------------------------------
Total at December 31, 1997 22,923,857 38,395 22,885,462
==============================================================================================
<FN>
Note:
(1) Pesos 22,567,224 determined as at the takeover.
</TABLE>
<PAGE> 34
BUENOS AIRES ENERGY COMPANY S.A.
Consolidated Balance Sheet at December 31, 1997
FOREIGN CURRENCY ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SCHEDULE G
================================================================================
ITEMS Type and amount of Current Amount in
foreign currency exchange rate Argentine currency
U.S.$ (Pesos)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and banks
Trade & Commerce U.S.$ 21,144 1.0000 24,144
-------------
TOTAL CURRENT ASSETS 24,144
-------------
TOTAL ASSETS 24,144
=============
CURRENT LIABILITIES
Commercial liabilities U.S.$ 7,538,396 1.0000 7,538,396
Bank loans (including U.S.$ 18,619,262 1.0000 18,619,262
interest)
Intercompany
liabilities
Camuzzi Argentina U.S.$ 1,272,548 1.0000 1,272,548
S.A.
Loma Negra S.A. U.S.$ 424,183 1.0000 424,183
CNG International U.S.$ 424,183 1.0000 424,183
Corporation
United Utilities U.S.$ 748,558 1.0000 748,558
International LTD
Central Piedra U.S.$ 1,610,728 1.0000 1,610,728
Buena
-------------
4,480,200
Intercompany
liabilities
United Utilities UK(pound)15,364 1.6563 25,448
-------------
TOTAL CURRENT 30,663,306
LIABILITIES
-------------
NON-CURRENT LIABILITIES
Loans
Negotiable bonds U.S.$230,000,000 1.0000 230,000,000
- Principal
Intercompany
liabilities
Camuzzi Argentina U.S.$ 1,836,000 1.0000 1,836,000
S.A.
Loma Negra S.A. U.S.$ 612,000 1.0000 612,000
CNG International U.S.$ 612,000 1.0000 612,000
Corporation
United Utilities U.S.$ 1,080,000 1.0000 1,080,000
International LTD
-------------
4,140,000
-------------
TOTAL NON-CURRENT 234,140,000
LIABILITIES
-------------
TOTAL LIABILITIES 264,803,306
================================================================================
</TABLE>
<PAGE> 35
BUENOS AIRES ENERGY COMPANY S.A.
INFORMATION REQUIRED UNDER ART. 64, CLAUSE (B) OF LAW 19,550
For the non-annual fiscal period commenced February 20, 1997 and ended
December 31, 1997
SCHEDULE H
<TABLE>
<CAPTION>
============================================================================================================
Items Total Cost of sales Administrative Marketing
(Pesos) (Pesos) expenses expenses
(Pesos) (Pesos)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchase of energy and 71,136,331 71,136,331 -- --
power
Fees for services 2,518,076 2,056,804 461,272 --
Salaries and wages 12,832,933 9,040,662 1,248,993 2,543,278
Traveling expenses 361,151 151,797 178,354 31,000
Taxes and charges 823,088 818,688 -- 4,400
Fixed Asset 5,931,789 5,635,199 148,295 148,295
depreciation
Intangible Asset 1,096,795 77,138 961,803 57,854
amortization
Services hired 3,290,359 2,451,920 709,769 128,670
Postage, 3,516,455 40,754 1,175,836 2,299,865
communications and
data processing
General expenses for 726,076 126,106 480,821 119,149
maintenance and
operation
Materials and spare 1,107,702 1,107,702 -- --
parts
Advertising 54,369 -- -- 54,369
----------------------------------------------------------------------------
Total at December 31, 103,395,124 92,643,101 5,365,143 5,386,880
1997
============================================================================================================
</TABLE>
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Buenos Aires Energy Company S.A.:
We have audited the accompanying balance sheet of Buenos Aires Energy Company
S.A. as of December 31, 1997 and the related statements of income, changes in
shareholders' equity and cash flow for the period commenced February 20, 1997
and ended December 31, 1997. We have also audited the consolidated balance sheet
of Buenos Aires Energy Company S.A. and its Subsidiary as of December 31, 1997
and the related consolidated statements of income and cash flow for the period
commenced February 20, 1997 and ended December 31, 1997, which have been
prepared in local currency in accordance with generally accepted accounting
principles prevailing in Argentina and are translated into U.S. Dollars as
described in Note 3 to the Financial Statements. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
The Company keeps its records and reports its financial position and results in
local currency, as required by Argentine law, but as described in Note 3 to the
Financial Statements, the accompanying financial statements are stated in U.S.
dollars solely for the convenience of readers; they result from the translation
at the December 31, 1997 exchange rate of the above mentioned local currency
financial statements. Furthermore, these financial statements do not include
supplementary data required by CNV Regulations.
We conducted our audit in accordance with generally accepted auditing standards
prevailing in Argentina. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
At the date of these financial statements, the analysis involving the
classification and appraisal of the different fixed assets transferred under the
privatization process is under way. This assignment had been entrusted to
independent technical appraisers by Empresa Distribuidora de Energia Atlantica
S.A., as mentioned in Note 4 to the consolidated financial statements. In view
of the foregoing, the Company has not disclosed the breakdown of those assets in
its consolidated financial statements, in accordance with prevailing accounting
standards.
<PAGE> 37
In our opinion, except for the lack of disclosure of the accounts forming part
of the consolidated fixed asset caption mentioned in the preceding paragraph,
the financial statements referred to above present fairly, in all material
respects, the financial position of Buenos Aires Energy Company S.A. at December
31, 1997 and the results of its operations, changes in its shareholders' equity
and cash flow for the period commenced February 20, 1997 and ended December 31,
1997 and the consolidated financial position of Buenos Aires Energy Company S.A.
and its Subsidiary at December 31, 1997, and the consolidated results of their
operations and cash flow for the period commenced February 20, 1997 and ended
December 31, 1997, in conformity with generally accepted accounting principles
in Argentina.
BUENOS AIRES, FEBRUARY 24, 1998
- -------------------------------
COOPERS & LYBRAND
(Partner)
------------------------------
Alberto Boruchowicz
