Pampa Energia SA (PAM) Risk Factors

The commodities market is characterized by its volatility. Commodities exports have contributed significantly to the revenues of the Argentine Government. Subsequently, the Argentine economy has remained relatively dependent on the price of its exports (mainly soy). This has generated a vulnerability in the Argentine economy with respect to the fluctuation of commodities' prices. During 2018, Argentina suffered a huge drought – presumably the biggest drought in the last 50 years. The effects of the drought in the agricultural sector caused significant economic problems for Argentina, with impacts in the soy and corn harvests that generated damages of approximately US$6 billion. A sustained decline in the international price of the main commodities exported by Argentina, or any future climate event or condition may have an adverse effect in the agricultural sector, and therefore in the revenues of the Argentine Government and its capacity to comply with the payments of its public debt, eventually generating recessive or inflationary pressures, thus affecting our business, financial situation and the results of our operations.

The energy sector was one of the sectors that were most damaged by the policies adopted by the Argentine Government since the 2001 crisis. In 2001, natural gas and electricity tariffs and prices were frozen, discouraging investments in the sector. The Argentine Government tried to generate incentives to attract investments by subsiding energy consumption. However, such measures failed and caused a stagnation in both oil and gas production and in the infrastructure necessary for generation, transmission and distribution of electricity; at the same time, consumption of both was growing. In 2011, the energy crisis lead to a shortage. In order to satisfy the increasing overdemand, the Argentine Government tried to resolve the issue by increasing energy imports, which had a negative outcome in the balance of trade, current accounts and the Central Bank's international reserves. The Macri administration declared a state of emergency with respect to the national electric system to address the existing distortions in the sector and to attract investments. The state of emergency allowed the Argentine Government to adopt measures aiming to stabilize the supply of electricity through the country, such as eliminating certain subsidies to energy and passing the additional cost resulting from such elimination to end-users, or the implementation of important tariff reviews to reflect real cost. Nevertheless, some of those measures were questioned before the Argentine courts and resulted in rulings that limited the Administration's initiatives (such as a ruling that halted increases in electricity and gas tariffs implemented on February 1, 2016, and instructed that non-compulsory public hearings prior to the approval of increases in tariffs prices should be held). Regarding the spot price for electricity, on February 27, 2020, the Secretariat of Energy issued Resolution No. 31/20, which modified –retroactively, from February 1, 2020 onwards certain aspects of the remuneration scheme established by Resolution SRRYME No. 1/19. The new scheme turns the whole remuneration scheme from foreign currency into local currency at an exchange rate of 60 Argentine Pesos per U.S. Dollar, and establishes a restatement factor, from the second month of application and onwards, that contemplates a formula composed by CPI (60%) and WPI (40%). However, on April 8, 2020, the Secretariat of Energy instructed CAMMESA to postpone the automatic application of the adjustment formula until further notice. Additionally, Resolution No. 31/20 modified the payments for electricity and added additional remuneration for high-thermic requirement hours of every month. For more information, please see ("-The Argentine Energy Sector- Remuneration Scheme for Generation Not Covered by Contracts- SE Res. No. 31/20: Current Remuneration Scheme as from February 2020"; "-Developments relating to the novel coronavirus may have a material adverse impact on our business operations, financial condition or results of operations") and "Item 4-Relevant Events- Measures Designed by the Argentine Government to Address the Covid-19 Outbreak" and "Impact of the COVID-19 outbreak on our Operations". The lack of action to correct the existing problems in generation, transportation and distribution in Argentina may adversely affect Argentina's economic situation and our business, financial situation and operational results. We cannot ensure that the Argentine Government will not adopt policies and measures that may have an adverse effect over our business, and that the policies implemented by the Argentine Government will be successful to correct the energy production sector in Argentina.

Public expenditure has significantly increased throughout the last decade in Argentina. The Argentine Government adopted several measures to finance its high public spending, including, among others, using the resources of the Central Bank and the ANSES to fund its financial needs, and implementing an expansionary monetary policy that increased inflation levels. Primary deficit may increase in the future if public expenditure continues to increase faster than the Argentine Government's revenues. A greater fiscal deficit may generate further complications for the Argentine Government's ability to access the financial markets in the long term, and, at the same time, limit even more Argentine corporations' access to those markets. As of the date of this annual report, we cannot predict how the measures that the new administration has applied and may continue to apply will impact the Argentine economy, and, in turn, our business, our financial condition and the result of our operations.

Prior to 2015, the credibility of the CPI, as well as other indices published by the INDEC, were called into question. On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to CPI, GDP, inflation and foreign trade data, as well as with poverty and unemployment rates, the Macri administration declared a state of administrative emergency for the national statistical system and the INDEC. The INDEC temporarily suspended the publication of certain statistical data until the reorganization of its technical and administrative structure to recover its ability to produce reliable statistical information. In 2017, the INDEC began publishing a National CPI, which is based on a survey conducted by the INDEC and several provincial statistical offices in 39 urban areas including each of Argentina's provinces. The official CPI inflation rate for the year ended December 31, 2019 was 53.8%. Any future required correction or restatement of the INDEC indexes could result in decreased confidence in Argentina's economy, which, in turn, could have an adverse effect on our ability to access international capital markets to finance our operations and growth, and which could, in turn, adversely affect our operational results and financial condition and cause the market value of our ADSs and our common shares to decline.

The Argentine Peso suffered important fluctuations during the last four years: it depreciated by more than 22% as compared to the U.S. dollar in 2016, and approximately 17% in 2017, 102% in 2018, and 59% in 2019. We are unable to predict the future value of the Peso against the U.S. Dollar. If the Argentine Peso devaluates further, the negative effects on the Argentine economy could have adverse consequences on our businesses, our operational results and the market value of our ADSs, including as measured in U.S. Dollars. On September 1, 2019, certain exchange controls and restrictions were reinstated in order to control the volatility in the currency exchange rate. The new controls and restrictions regulate, among others, the purchase of external assets for the Argentine population, the payment of financial debts outside the Argentine borders, the payment of dividends, the payment of imports of goods and services, the obligation to repatriate and settle the income from exports of goods and services. Additional volatility, appreciation or depreciation of the Peso against the U.S. dollar or reduction of the Central Bank's reserves because of currency intervention could adversely affect the Argentine economy and our ability to service our debt obligations and could affect the value of our ADSs and our common shares. For more information, please see "Item 10. Additional Information – Exchange Control" below. On the other hand, a significant appreciation of the Argentine Peso against the U.S. Dollar also presents risks for the Argentine economy, including the possibility of a reduction in exports (as a consequence of the loss of external competitiveness). Any such increase could also have a negative effect on economic growth and employment, reduce the Argentine public sector's revenues from tax collection in real terms, and have a material adverse effect on our business, our operational results, our ability to repay our debt within the respective maturity dates and affect the market value of our ADSs, as a result of the overall effects of the weakening of the Argentine economy. Fluctuations in the value of the Peso may also adversely affect the Argentine economy, the prices of our products, our financial condition and operational results. The devaluation of the Argentine Peso may have a negative impact on the ability of certain Argentine businesses to service their foreign currency-denominated debt, lead to high inflation, significantly reduce real wages, jeopardize the stability of businesses whose success depends on domestic market demand, including public utilities and the financial industry, and adversely affect the Argentine Government's ability to honor its foreign debt obligations.

Historically, inflation has materially undermined the Argentine economy and the Argentine Government's ability to create conditions that allow growth. In recent years, Argentina has confronted inflationary pressures, evidenced by significantly higher fuel, energy and food prices, among other factors. According to data published by the INDEC, CPI rates for the following months were: CPI 2019 July August September October November December 2.2% 4.0% 5.9% 3.3% 4.3% 3.7% 2020 January February March 2.3% 2.0%  3.3% For more information, please see "-The credibility of several Argentine economic indexes was called into question, which may lead to a lack of confidence in the Argentine economy and, in turn, limit our ability to access credit and the capital markets" below. The Argentine Government has implemented programs to control inflation and monitor prices for essential goods and services, including the freezing of prices of supermarket products, and through price support arrangements with private sector companies in several industries and markets. The Argentine Government's adjustments to electricity and gas tariffs, as well as the increase in the price of gasoline have affected prices, creating additional inflationary pressure. If the value of the Argentine Peso cannot be stabilized through fiscal and monetary policies, an increase in inflation rates could be expected. A high inflation rate affects Argentina's foreign competitiveness by diluting the effects of the Peso devaluation, negatively impacting employment and the level of economic activity and undermining confidence in Argentina's banking system, which may further limit the availability of domestic and international credit to businesses. In turn, a portion of the Argentine debt continues to be adjusted by the CER, a currency index, that is strongly correlated with inflation. Therefore, any significant increase in inflation would drive an increase in the Argentine external debt and consequently in Argentina's financial obligations, which could exacerbate the stress on the Argentine economy. The efforts undertaken by the Argentine Government to reduce inflation have not achieved the desired results. A continuing inflationary environment could undermine our operational results, adversely affect our ability to finance the working capital needs of our businesses on favorable terms and our operational results and cause the market value of our ADSs and our common shares to decline. The inflation rates may increase in the future, and there is uncertainty regarding the effectiveness of the policies implemented by the Argentine Government to reduce and control inflation and the potential impact of those policies. An increase in inflation may adversely affect the Argentine economy, which in turn may have a negative impact in our financial condition and operational results.

Between 2007 and 2015, the Argentine Government increased its direct intervention in the Argentine economy, including expropriations, price controls, foreign exchange controls and amendments in legislation that affected foreign trade and investments. Those policies had a material adverse effect in the private sector companies, including ourselves. From December 2015 to December 2019, the Macri administration implemented several significant economic and policy reforms towards the de-regulation of the economy and stabilization of the main economic indicators. Those policies included (i) declaration of a state of emergency for the electricity system and reforms thereto; (ii) reforms affecting the transportation and distribution of natural gas; (iii) reforms concerning the INDEC; (iv) reforms affecting foreign exchange and foreign trade; (v) modification of Argentina's debt policy; (vi) the correction of monetary imbalances; (vii) reform of the pension framework; (viii) Tax Reform; and (ix) the implementation of a fiscal consensus (Pacto Fiscal). Nevertheless, the high inflation rates and the Peso depreciation forced the Argentine Government to reinstate foreign exchange controls. On August 11, 2019, the PASO were held and the results indicated that President Macri would not be reelected and could be replaced by the opposition candidate Alberto Fernández. As a result, the political and economic environment became subject to uncertainty. After the PASO, the Peso suffered a 30% devaluation, the Argentine stock markets fell at an average of 50% and the country-risk rate surpassed 2,000 points on August 28, 2019. On October 27, 2019, the presidential general elections were held, with the same results as the PASOs. The new administration took office on December 10, 2019, and since then has implemented –and is expected to continue implementing – several policies and reforms, mainly in the economy. The Macri and the current administration implemented several policies pursuing a reduction in inflation and a stabilization in the foreign currency market. Those policies included: -          Reprofiling of the local-law debt: On December 20, 2019, the Argentine Government issued Decree No. 49/19, which established that certain debt amortization payment obligations emerging from certain Treasury Bonds (Letras del Tesoro) denominated in U.S. Dollars were deferred in full until August 31, 2020. Additionally, on February 5, 2020, the Argentine Congress passed Law No. 27.544 (the Law for the Restoration of the Sustainability of the National Debt issued under Foreign Law). This Law authorized the Executive Branch to carry out transactions regarding the administration of liabilities and/or swaps and/or restructuring of interests payments and principal amortizations of national bonds issued under foreign law. Additionally, the Executive Branch issued Decree No. 141/20 under which it deferred the payment of the amortization for national bonds in dual currency with maturity in 2020 entirely until September 30, 2020, and the interruption of the accrual of interests. -          Reinstating of foreign exchange controls: On September 1, 2019, certain foreign exchange restrictions were reinstated to diminish the volatility of the Argentine Peso with respect to the U.S. Dollar. These restrictions, which were – and continue to be – further amended and complemented, regulate, among others, the purchase of external assets for Argentine citizens, the payment of financial debts outside the Argentine borders, the payment of dividends, the payment of imports of goods and services, the obligation to repatriate and settle the incomes from exports of goods and services. For more information, please see "Item 10. Additional Information – Exchange Control" below. -          Declaration of the state of emergency: The Social Solidarity and Productive Reactivation Law declared a state of emergency with respect to several areas: economy, finance, fiscal, administrative, pensions, tariffs, energy and social, and granted the Executive Branch several powers, allowing it to introduce exceptional measures and policies in the energy market during the state of emergency. The Social Solidarity and Productive Reactivation Law also allows the Executive Branch to intervene in the ENRE and the ENARGAS for up to one year, and to designate the officials who will be in charge of the decision-making processes. Additionally, the Social Solidarity and Productive Reactivation Law sets a cap at 8% for the export duty applicable to hydrocarbons, establishing that in any case such export duty shall be deducted from the base value for the calculation and payment of royalties. However, its implementation is still pending, therefore current export duty to hydrocarbons is set at 12%. By means of Decree No. 277/20, the Executive Power ordered the intervention of the ENRE until December 31, 2020. -          Tax reforms: Several tax reforms were completed. For more information, please see "Item 10. Additional Information – Taxation" below. -          Tariffs revisions: The Social Solidarity and Productive Reactivation Law freezes of natural gas and electricity tariff schedules for up to 180 days counted from the effectiveness of such law, and encourages the Argentine provinces to adhere to this policy. Additionally, the Social Solidarity and Productive Reactivation Law authorizes the Executive Branch to renegotiate tariffs under federal jurisdiction within the RTI or based on an extraordinary revision in accordance with Law N° 24,076. -          Tariffs on exports: The Social Solidarity and Productive Reactivation Law authorizes the Executive Branch to establish tariffs on exports that in no case can exceed 33% of the taxable value or the official FOB price. The Social Solidarity and Productive Reactivation Law caps the percentage of tariffs on exports of hydrocarbons and mining to 8% of the taxable value or the official FOB price, and establishes that in any case such export duty shall be deducted from the base value for the calculation and payment of royalties. However, its implementation is still pending, therefore current export duty to hydrocarbons is set at 12%. -          Double severance payment for labor termination without cause: Executive Decree No. 34/19, issued on December 13, 2019, declared a labor public emergency for the term of 180 days counted from the effectiveness of the decree. During this emergency process, in case of termination without just cause of a labor relationship started prior to the effectiveness of said decree, the employee will be entitled to receive a compensation that equals two times the severance due in accordance with applicable laws. The duplication is applicable to every item of the compensation. Decree No. 34/19 also establishes that the double severance payments will not be applicable to labor relationships that start after the effectiveness of said decree. Additionally, the Social Solidarity and Productive Reactivation Law established new percentages and mechanisms to calculate the employers' contributions. -          Suspension of Section 124 of Law No. 27,467: The Social Solidarity and Productive Reactivation Law suspended the applicability of the second paragraph of section 124 of Law No. 24,467. That paragraph took away ENRE's powers and abilities relating to the public service of electricity distribution once Edenor and Edesur were transferred to the jurisdictions of the City of Buenos Aires and the Province of Buenos Aires (for more information, please see "The Argentine Energy Sector – Regulatory Authorities"). The Social Solidarity and Productive Reactivation Law reinstated ENRE's powers and attributions for one year. As of the date of this annual report, the impact of the aforementioned policies cannot be predicted, and any other policy or action implemented by the Argentine Government may result in an adverse effect for the Argentine economy and/or the energy sector. Pampa does not have any control over the implementation of, and cannot predict the outcome of, the reforms of the regulatory framework that rule in the different sectors in which Pampa performs its operations, nor the effect that those reforms may have over Pampa's business, financial condition and operations. Additionally, uncertainty over these reforms and policies may result in volatility in the prices of Argentine financial assets, especially in Argentine corporations' debt and equity securities listed in local and/or international markets. Moreover, the uncertainty may affect the main macroeconomic indicators, such as foreign exchange, production, labor or inflation. Pampa cannot affirm that the Argentine economic, regulatory, social and political framework or the policies that the Argentine Government adopts or may adopt, will not adversely affect the market value of our ADSs, our business, financial condition and/or operational results.

The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high levels of inflation and currency devaluation. Sustainable economic growth in Argentina depends on a variety of factors including the international demand for Argentine exports, the stability and competitiveness of the Peso against foreign currencies, confidence among consumers and foreign and domestic investors and a stable rate of inflation, national employment levels and the circumstances of Argentina's regional trade partners. The Argentine economy has been volatile since 2011. For example, Argentina's economy grew in 2017, but contracted in 2018. The Argentine economy remains vulnerable, as reflected by the following economic conditions: -          according to the revised calculation of 2004 GDP published by the INDEC on June 29, 2016, which forms the basis for the real GDP calculation for every year after 2004, and recent data published by the INDEC in 2020, for the year ended December 31, 2019, Argentina's real GDP decreased by 1.7 % compared to the same period in 2018. Argentina's performance has depended to a significant extent on high commodity prices which, despite having favorable long-term trends, are volatile in the short-term and beyond the control of the Argentine Government and the private sector; -          The IMF, in its World Economic Outlook issued in October 2019, projected a 3.1% contraction in Argentina's economy in 2019 due to the loss of trust and the hardening of the conditions required to access credit and a 6.0% contraction for 2020 due to the effects of COVID19. For more information, see "Item 3. Key Information-Risk Factors- Developments relating to the novel coronavirus may have a material adverse impact on our business operations, financial condition or results of operations" and ""Item 4-Relevant Events- Measures Designed by the Argentine Government to Address the Covid-19 Outbreak" and "Impact of the COVID-19 outbreak on our Operations"; -          continued increases in public expenditures have resulted and could continue to result in fiscal deficit and affect economic growth; -          inflation remains high and may continue at those levels in the future; -          investment as a percentage of GDP remains low to sustain the growth rate of the past decades; -          protests or strikes may adversely affect the stability of the political, social and economic environment and may negatively impact the global financial market's confidence in the Argentine economy. We cannot guarantee that these kinds of events will not occur in the future; -          energy or natural gas supply may not be sufficient to supply increased industrial activity (thereby limiting industrial development) and consumption; -          unemployment and informal employment remain high; and -          the Argentine Government's economic expectations may not be met and the process of restoring confidence in the Argentine economy may take longer than anticipated. As in the recent past, Argentina's economy may be adversely affected if political and social pressures inhibit the implementation by the Argentine Government of policies designed to control inflation, generate growth and enhance consumer and investor confidence, or if policies implemented by the Argentine Government that are designed to achieve these goals are not successful. These events could materially affect our financial condition and operational results, or cause the market value of our ADSs and our common shares to decline. In recent years, the Argentine Peso experienced a rapid devaluation against major foreign currencies, particularly against the U.S. Dollar. According to the exchange rate information published by the Banco de la Nación Argentina, the Argentine Peso devaluated by 59% against the U.S. Dollar during the year ended December 31, 2019 (compared to 102%, 17% and 22% in the years ended December 31, 2018, 2017 and 2016, respectively). Throughout 2019, the depreciation of the Peso continued, and in September 2019, as a result of the financial and economic events that took place after the open primary elections (the "PASO"), the Argentine Government issued Decree No. 609/19 that established certain regulations regarding imports and exports of goods and services, foreign exchange controls and currency transfers to other countries and access to the foreign currency market. Also, due to the remarkable and sustained decrease in the price of the Argentine national bonds, the Argentine Government issued Decree No. 596/19, which postponed the maturity of certain local-law bonds. More recently, the Argentine government announced its plans for the restructuring of its external debt, including foreign-law bonds, debt with the IMF and other international multilateral organizations and the Paris Club group of sovereign lenders. If the Argentine government is not able to restructure its outstanding debt obligations, private sector companies, such as our company, may not be able to access the international capital markets for funding on accessible terms. We cannot affirm there will be no adverse effect on our business, financial condition or operational results or no negative impact on the market value of our ADSs and our common shares resulting from a decline in economic growth, an increase in economic instability or the expansion of economic policies and measures taken or that may be adopted in the future by the Argentine Government to control inflation or address other macroeconomic developments that affect private sector entities such as us, all developments over which we have no control.

Although economic conditions vary from country to country, investors' perceptions of events occurring in certain countries have in the past substantially affected, and may continue to substantially affect, capital flows into and investments in securities of issuers from other countries, including Argentina. There can be no assurance that the Argentine financial system and securities markets will not be adversely affected by policies that may be adopted by foreign governments or the Argentine Government in the future. Argentina can also be adversely affected by negative economic or financial events that take place in other countries, subsequently affecting our operations and financial condition, including our ability to repay our debt at its maturity date. Argentina's economy is vulnerable to external shocks. For example, economic slowdowns, especially in Argentina's major trading partners such as Brazil, led to declines in Argentine exports in the last few years. Specifically, fluctuations in the price of commodities sold by Argentina and a significant devaluation of the Peso against the U.S. Dollar could harm Argentina's competitiveness and affect its exports. In addition, international investors' reactions to events occurring in one market may result in a "contagion" effect which could lead to an entire region or class of investment being disfavored by international investors. Financial and securities markets in Argentina are also influenced by economic and market conditions in other markets worldwide. U.S. monetary policy has significant effects on capital inflows and asset price movements in emerging market economies. Increases in U.S. interest rates result in the appreciation of the U.S. Dollar and decreases in prices for raw materials, which can adversely affect commodity-dependent emerging economies. In January 2017, Donald J. Trump took office as President of the United States, generating significant uncertainty about the future relationship between the United States and other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade between the United States and other nations. Even though President Trump's protectionist measures are not, for the time being, aimed at Argentina, we cannot predict how they will evolve, nor can we predict the effect that the same or any other measure taken by the Trump administration could cause on global economic conditions and the stability of global financial markets. During the second semester of 2019, Latin America was subject to a period of turmoil stemming from unexpected results regarding certain political elections and a couple of major protests throughout the region generating instability and political uncertainty which could affect Argentina and our business. On January 1, 2019, Jair Bolsonaro took office as Brazil's president, generating uncertainties in connection with his administration's announced policies. Those policies included, among others, a major economic reform and significant changes in foreign relationships. Argentina's foreign trade depends highly on exports to Brazil and Argentina's trade balance could be significantly affected with a deterioration of economic conditions in Brazil or of its diplomatic relationships. Other political and economic crises in Brazil may have a material adverse effect on Argentina's economy and on our business, financial condition and operational results. The Brazilian economy contracted by 3.6% during 2016. Notwithstanding, Brazil's economy grew 1.1% in 2017 and 2018, and 0.9% in 2019. A deterioration of economic conditions in Brazil may reduce demand for Argentine exports and increase demand for Brazilian products. Luis Alberto Lacalle Pou was elected President of the Oriental Republic of Uruguay after winning the elections on November 24, 2019. Political uncertainties may arise due to a change in the governing party after 15 years, and may adversely affect Argentina, which considers Uruguay a key ally. Additionally, the political and economic crisis in Venezuela may adversely affect Argentina and our Business. See "-Our activities may be adversely affected by events in other countries in which we do business, particularly in Venezuela" below. A slowdown of China's GDP growth has led to a reduction in exports to China, which in turn has caused oversupply and price declines in certain commodities. Decreases in exports may have a material adverse effect on Argentina's public finances due, among other factors, to a loss of revenues relating to tax on exports, and cause an imbalance in the country's exchange market. Recently, the IMF issued a report warning that the economic growth expected for 2020 may be lowered due to the coronavirus outbreak. On June 23, 2016, the United Kingdom voted in favor of exiting the European Union (the "Brexit"). Brexit became effective on February 1, 2020 and is currently undergoing a transition period ending on December 31, 2020. Brexit long-term effects still remain uncertain, but volatility in the financial markets –among other negative effects –is expected in the short and medium-term. Additionally, Brexit could lead to additional political, legal and economic instability in both the European Union and the United Kingdom, producing negative impacts on the commercial trade of Argentina with those regions, which may in turn have a material adverse effect on our business, financial condition and operational results.

The effects of a global or regional financial crisis and related turmoil in the global financial system may have a negative impact on our business, capacity to access credit and international capital markets, financial condition and operational results, which is likely to be more severe on an emerging market economy, such as Argentina (See "-Argentina's ability to obtain financing from international markets could be limited, which may impair its ability to implement reforms and foster economic growth and, consequently, affect our business, results of our operations and growth prospects. The Argentine Government may not be able to renegotiate its debt with their private creditors and/or with the IMF, affecting its capacity to obtain financing and credit and to plan and implement public policies and reforms that foster economic growth" below). This was the case in 2008, when the global economic crisis led to a sudden economic decline in Argentina in 2009, accompanied by inflationary pressures, depreciation of the Peso and a drop in consumer and investor confidence. The effects of an economic crisis on our customers and on us cannot be predicted. Weak global and local economic conditions could lead to reduced demand or lower prices for energy, hydrocarbons and related oil products and petrochemicals, which could have a negative effect on our revenues. Economic factors such as unemployment, inflation and the unavailability of credit could also have a material adverse effect on the demand for energy and, therefore, on our business, financial condition and operational results. The financial and economic situation in Argentina or in other countries in Latin America, such as Brazil, may also have a negative impact on us and third parties with whom we do, or may do, business.

After PEPE II and PEPE III began their commercial operations, certain defects were evident in the blades of their wind turbines, which led to their inability to be used. Many of the blades had to be replaced. Although the Company and the wind turbine supplier are taking all necessary measures to replace and repair the defects, we cannot assure the full effectiveness of such repairs or that such defects or other defects do not arise in the future, which in turn may affect the operations of the Company's wind farms and have an adverse effect on the business, our financial condition, operational results or our ability to pay our debts.

Greenwind, PEPE II and PEPE III's energy generation depends on the prevailing meteorological conditions. Meteorological conditions that result in lower winds could lead to a breach of our sales commitments with CAMMESA (in the case of Greenwind) and WEM Large Users (PEPE II and PEPE III). Such breach could lead, in turn, to the application of penalties in favor of our clients (such penalties differ based on the type of contract executed with each PEPE II and PEPE III's client). Moreover, PEPE II and PEPE III depend on their ability to have their estimated energy generation fully contracted with WEM Large Users and for each project to maintain its priority dispatch. If a project loses its priority dispatch, its ability to contract its energy generation could be impaired. Moreover, if the energy generation is not contracted with WEM Large Users, then such energy will be remunerated according to SE Resolution 31/20 which establishes lower prices. The ability to contract the projects' energy generation may also be impaired by regulatory measures taken by CAMMESA or the relevant authorities. For example, measures that affect WEM Large Users to exit the "Group Purchase Mechanism" (Mecanismo de Compra Conjunta, a mechanism by means of which WEM Large Users may comply with their statutory obligations to purchase renewable energy from CAMMESA would result in lower demand for renewable energy from MATER projects and, therefore, potentially affect our operational results.

Weather conditions may influence the demand for electricity, Edenor's ability to provide it and the costs of providing it. In particular, severe weather may adversely affect Edenor's operational results by causing significant demand increases, which Edenor may be unable to meet without a significant increase in operating costs. This could strongly impact the continuity of Edenor's services and its quality indicators. Furthermore, any such disruptions in the provision of Edenor's services could expose Edenor to fines and orders to compensate those customers affected by any such power cuts, as has occurred in the past. Edenor's financial condition, operational results and cash flows could therefore be negatively affected by changes in weather conditions and severe weather.

In late December 2019 a notice of pneumonia originating from Wuhan, Hubei province (COVID-19, caused by a novel coronavirus) was reported to the World Health Organization, with cases soon confirmed in multiple provinces in China, as well as in other countries. The virus rapidly spread globally and, as of the date of this annual report, has affected more than 150 countries and territories around the world, including Argentina, Brazil, Paraguay, Uruguay and the United States. Several measures have been undertaken by the Argentine Government and other governments around the globe, including the use of quarantine, screening at airports and other transportation hubs, travel restrictions, suspension of visas, nation-wide lockdowns, closing of public and private institutions, suspension of sport events, restrictions to museums and tourist attractions and extension of holidays, among many others. The Executive Branch of the Argentine Government issued Decree No. 260/2020 on March 12, 2020, which declared a public health emergency for a period of one year and established a mandatory quarantine of fourteen days for the following individuals: (i) suspected cases, including individuals with fever and respiratory symptoms and individuals who had traveled in the last few days to affected areas or had been in contact with individuals who had confirmed positive or were likely positive for COVID-19, (ii) confirmed cases, (iii) those who had arrived in Argentina after March 12, 2020 having traveled through affected areas, and (iv) those who had arrived in Argentina in the last fourteen days prior to March 12, 2020 having traveled through affected areas. Incoming flights from affected areas were also prohibited for a period of 30 days. The Executive Branch issued Decree No. 297/2020 on March 20, 2020, which established a mandatory and preventive social isolation effective as of March 20, 2020 until March 31, 2020, which, as of the date of this Annual Report, was extended until May 10, 2020, without prejudice to the possibility that the term may be extended again. The Decree expressly stated that minimal and essential movement would be allowed only for the purchase of food, medication and cleaning products. Some individuals, such as healthcare personnel, supermarket and pharmacy employees, among others, would be exempted from the isolation measure. Some essential activities, like power generation plants, oil basins, refining plants and food and medical industries, were allowed. Moreover, on April 7, 2020, through Administrative Decision No. 468/2020, construction activities for energy infrastructure works, including our ongoing expansion projects, were included as an essential activity. However not all contractors and suppliers have been declared essential and also the arrival of expert personnel needed for the projects has not been permitted because the travel restrictions and national borders lockdown remains in force. In addition, the Argentine Goverments established special protocols that affect the development and productivity of construction work. As a result, we expect that the schedules of our ongoing projects and the estimated costs for their completion will be affected but, we cannot yet determine the magnitude of the impact. In this sense, in the case of the Cycle Closing Project at CTGEBA ((for more information, please see "Progress in the Cycle Closing Project at CTGEBA"), our best estimate, based on the information that we have as of the date of this annual report, is for the commercial commissioning of the closing-to-combined-cycle at CTGEBA Plus to be concluded around the third quarter of 2020, when the originally estimated date was the second quarter of 2020. To date, the outbreak of the novel coronavirus has caused significant social and market disruption. For example, the Dow Jones declined by about 28% between February 11 and March 12, 2020. The long-term effects on the global economy, Argentine economy and the Company of the coronavirus pandemic, are difficult to assess or predict, and may include a decline in market prices (including the market prices of our common shares), risks to employee health and safety, collapse in the demand for our products and reduced sales in the impacted geographic locations. Any prolonged restrictive measures put in place in order to control an outbreak of a contagious disease or other adverse public health development such as the ongoing COVID-19 outbreak, may have a material and adverse effect on our business operations, financial condition or operational results. We may also be affected by the need to implement policies limiting the efficiency and effectiveness of our operations, including home office policies. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term. Additionally, we cannot predict how the disease will evolve in Argentina, nor anticipate what additional restrictions the Argentine Government may impose. However, we expect COVID-19 to have a significant adverse effect on the world economy, which will in turn negatively affect Argentina's economy Furthermore, the crisis caused by COVID-19 has resulted in a decrease in the demand for crude oil, since industrial and domestic activity has slowed down in many countries due to control measures. On the other hand, in the context of the coronavirus pandemic crisis, Russia broke the agreement it had with Saudi Arabia in the internal dispute for oil production and, in response, Saudi Arabia lowered the price of oil to less than US$30 per barrel, levels that have not been seen for 16 years. Moreover, the United States oil prices traded below zero for the first time ever, and producers and traders were essentially paying other market participants to take their oil. In particular, the Argentine economy was adversely affected by a lower demand from customers, interruptions in the payments chains, among other adverse effects due to control measures imposed by the Argentine Government. For more information, please see "-Substantial or extended declines and volatility in the prices of crude oil, oil products and natural gas may have an adverse effect on our operational results and financial condition". The Company is currently considering available alternatives to mitigate the effects this outbreak may have on its operations and ongoing projects, as well as with regards to measures adopted by the Argentine Government, which so far have resulted in a slowdown in economic activity that will further adversely affect economic growth in Argentina in 2020 and possibly 2021, to a degree that we cannot quantify as of the date of this annual report. For more information on the measures adopted by the Argentina Government. For more information, please see "Item 4-Relevant Events- Measures Designed by the Argentine Government to Address the Covid-19 Outbreak" and "Impact of the COVID-19 outbreak on our Operations". We cannot affirm that the current COVID-19 outbreak will not cause a material adverse effect in our businesses and operational results, as well as a decrease in the market value of our shares and corporate bonds.

In the recent years, Edenor's tariffs have been challenged by Argentine consumer associations, such as the action brought against Edenor in December 2009, by an Argentine consumer association, (Unión de Usuarios y Consumidores), seeking to annul certain retroactive tariff increases, which was ultimately dismissed by the Argentine Supreme Court of Justice on October 1, 2013. In May 2016, Edenor was notified by several courts of the Province of Buenos Aires of certain injunctions granted to individual and collective users against Resolution No. 6/16 and Resolution No. 1/16 issued by the ENRE (which authorized our new tariff schedule as from February 2016). Consequently, the then applicable tariff schedule, which included the WEM prices established by Resolution No. 6/16, was not applied during certain periods in 2016 (i) to the entire concession area as a result of the injunctions issued in the "Abarca" case and (ii) to the districts of "Pilar" and "La Matanza" where injunctions remained in effect until October 24 and November 11, 2016, respectively, when they expired. Therefore, as of those dates tariff increases have been applied to all users. If any future legal challenge were successful and prevented Edenor from implementing any tariff adjustments granted by the Argentine Government, Edenor could face a decline in collections from its users, and a decline in its operational results, which could have a material adverse effect in our financial condition and the market value of our ADSs or our common shares.

Since the execution of the Adjustment Agreement and as required by the Argentine Government, Edenor was engaged in an RTI with the ENRE through February 1, 2017. The Adjustment Agreement contemplated a cost adjustment mechanism for the transitional period during which the RTI process was being conducted. This mechanism, known as the Cost Monitoring Mechanism (CMM), required the ENRE to review our actual distribution costs every six months (in May and November of each year) and adjust our distribution margins to reflect variations of 5% or more in our distribution cost base. We could also request that the ENRE apply the CMM at any time that the variation in our distribution cost base was at least 10% or more. Any adjustments, however, were subject to the ENRE's assessment of variations in our costs, and the ENRE's approval of adjustments were not sufficient to cover our actual incremental costs in a timely manner. During such time, even when the ENRE approved adjustments to Edenor's tariffs, there was a lag between the time when we actually experienced increases in Edenor's distribution costs and the time when Edenor received increased income following the corresponding adjustments to our distribution margins pursuant to the CMM. In January 2016, the ME&M issued Resolution No. 7/16, pursuant to which the ENRE implemented a VAD adjustment to the tariff schedule on account of the future RTI in effect as of February 1, 2016. In addition, such resolution: (i) abrogated the PUREE; (ii) repealed Resolution No. 32/15 as from the date the ENRE resolution implementing the new tariff schedule becomes effective; (iii) discontinued the application of mechanisms that imply the transfer of funds from CAMMESA in the form of loan agreements with CAMMESA; (iv) ordered the implementation of the actions required to terminate the trusts created pursuant to Resolution No. 347/12 of the ENRE and (v) prohibited the distribution of dividends in accordance with Section 7.04 of the Adjustment Agreement. However, pursuant to Resolution No. 7/16, the ENRE issued Resolution No. 1/16 establishing a new tariff structure, which remained in force (with certain suspensions as a result of injunctions, which are no longer in effect) until February 2017, when the RTI process was completed. Prior to the completion of the RTI process, several regulatory mechanisms, programs or changes were implemented from time to time by the ENRE to adjust Edenor's tariffs to reflect increased costs. Any requested adjustments were usually subject to the ENRE's assessment of variations in Edenor's costs, and not sufficient to cover Edenor's actual incremental costs in a timely manner. On April 1, 2016, the ENRE issued Resolution No. 55/16, which approved the program for the review of the distribution tariff scheme, establishing the criteria and methodologies for completing the RTI process. On September 5, 2016, pursuant to Resolution No. 55/16, Edenor submitted its rate schedule proposal for the following five-year period. On October 28, 2016, a public hearing was held to provide information and listen to the public opinion on the RTI. The RTI was completed on February 1, 2017, on which date the ENRE issued Resolution No. 63/17, through which it approved a new tariff scheme that established our new distribution added value (VAD) for the following five-year period. On January 31, 2018, the ENRE issued Resolution Nº 33/18 approving the new distribution cost for Edenor applicable from February 1, 2018 and the new tariff scheme applicable to Edenor. On July 31, 2018, the ENRE issued Resolution No. 208/18, pursuant to which it approved, the CPD for January 2018 through June 2018 of which 7.93% was to be applied as of August 1, 2018, and 6.51% in six consecutive monthly installments as of February 1, 2019. The CPD amounted to 15.85%.  For more information, see "Item 4. Our Distribution of Energy Business". However, if Edenor is not able to recover all future cost increases and have them reflected in its tariffs, and/or if there is a significant lag of time between when it incurs the incremental costs and when it receives increased income, Edenor may be unable to comply with its financial obligations and may suffer liquidity shortfalls and need to restructure its debt to ease its financial condition, any of which, individually or in the aggregate, could have a material adverse effect on our business and operational results and may cause the value of our ADSs or our common shares to decline.

Argentina's history of defaults on its external debt and the protracted litigation with holdout creditors may reoccur in the future and prevent Argentine companies such as us from accessing the international capital markets readily or may result in higher costs and more onerous terms for such financing, and may therefore negatively affect our business, operational results, financial condition, the value of our securities, and our ability to meet our financial obligations. Following the default on its external debt in 2001, Argentina sought to restructure its outstanding debt by offering holders of the defaulted bonds two opportunities to exchange them for newly issued debt securities, in 2005 and again in 2010. Holders of approximately 93% of Argentina's defaulted debt participated in the exchanges. Nonetheless, a number of bondholders held out from the exchange offers and pursued legal actions against Argentina in the courts of the United States and several other jurisdictions. The Macri Administration settled several agreements with the defaulted bondholders, ending more than 15 years of litigation. On April 22, 2016, Argentina issued US$16.5 billion of new bonds, of which US$9.3 billion were applied to pay the amounts due to comply with the agreements settled with the defaulted bondholders. Since then, almost every pending claim has been settled. In addition, certain bondholders that did not participate in the exchange offers described above, filed claims before the ICSID alleging that the emergency measures adopted by the Argentine Government in 2002 did not meet the just and equal treatment requirements of several bilateral investment treaties to which Argentina is a party. Several of these claims have been granted award against Argentina. In June 2018, the Argentine Government agreed to enter into the stand-by credit facility (the "SBA") with the IMF that granted Argentina access to financing by the IMF. The SBA granted Argentina credit for US$50 billion subject to public spending cuts and the compliance with certain fiscal and political benchmarks by the Argentine Government. After further reviews, the IMF extended the amounts granted by the SBA for a total amount of US$57.1 billion. As of the day of this annual report, the Argentine Government is trying to renegotiate the credit due to the IMF, but has not reached an agreement yet. On August 28, 2019, the Macri administration issued a decree deferring the scheduled payment date for 85% of the amounts due on short-term notes maturing in the fourth quarter of 2019, governed by Argentine law and held by institutional investors. Of the deferred amounts, 30% would be repaid 90 days after the original payment date and the remaining 70% would be repaid 180 days after the original payment date, except for payments under Lecaps ("Peso denominated Treasury Bond" – "Letras del Tesoro Capitalizables en Pesos") due 2020 held domestically, which would be repaid entirely 90 days after the original payment date. Amounts due on short-term notes held by individual investors would be paid as originally scheduled. In December 2019, the Fernández administration further extended payments of a series of short term U.S. Dollar-denominated notes which were held by institutional investors until the end of August 2020. Additionally, on February 11, 2020, the Argentine Government decreed the extension of maturity to September 30, 2020 of a U.S. Dollar-linked treasury note governed by Argentine law, which had been originally subscribed to a large extent with U.S. Dollar remittances, to avoid a payment with Argentine pesos that would have required significant stabilization efforts by the monetary authority. Also, in February 2020, the Argentine Congress enacted a law enabling the government to take all necessary steps to ensure the Argentine sovereign debt governed by foreign law as sustainable. Additionally, an IMF team visited Buenos Aires in February 2020 to discuss the recent macroeconomic developments and learn more about the Argentine authorities' economic plans and policies. On February 19, 2020 the IMF issued a statement in which, in light of recent developments and the materialization of certain risks to debt sustainability that were considered during the previous Debt Sustainability Analysis (DSA) published in July 2019, the IMF staff assessed Argentina's debt to be unsustainable. Accordingly, the IMF staff stated that "a definitive debt operation-yielding a meaningful contribution from private creditors-is required to help restore debt sustainability with high probability". On April 5, 2020, the Executive Branch issued Decree No. 346/2020 by which the Government deferred the payment of interest and principal amortization obligations of certain sovereign debt issued under Argentine law and denominated in U.S. Dollars, until December 31, 2020, or an earlier date to be determined by the Ministry of Economy, considering the progress of the public debt's sustainability restoring process (Proceso de Sostenibilidad de la Deuda Pública). This Decree did not affect the currency of denomination, principal or interest set forth under the original terms of the issuance. On April 21, 2020, the Argentine Government announced its offer to exchange external bonds in the aggregate amount of approximately US$64 billion for new bonds. The Argentine Government did not make the interest payment due on April 22, 2020 with respect to three of its US$-denominated bonds and availed itself of the 30-day grace period provided under the indenture. As of the date of this annual report, there is no certainty on the acceptance the exchange offer will have among the bondholders or whether further negotiations and proposals will be carried out and the consequences of such negotiations. Any new event of default by the Argentine Government could negatively affect their valuation and repayment terms, as well as have a material adverse effect on the Argentine economy and, consequently, our business and results of operations. Without renewed access to the financial market, the Argentine Government may not have the financial resources to implement reforms and boost growth, which could have a significant adverse effect on the country's economy and, consequently, on our activities. Likewise, Argentina's inability to obtain credit in international markets could have a direct impact on the Company's ability to access those markets to finance its operations and its growth, including the financing of capital investments, which would negatively affect our financial condition, operational results and cash flows. Past situations, such as the lawsuits with creditors that did not accept the debt exchange, the claims before the ICSID, and the economic policy measures adopted by the Argentine Government or any future default of Argentina regarding its financial obligations, including as a consequence of the exchange offer not being accepted by holders, may harm Argentine companies' ability to obtain financing. Further, the financial conditions of such access could be disadvantageous to Argentine companies and, therefore, may adversely affect our business, results of operations, financial condition, the value of our securities, and our ability to meet our financial obligations. We cannot predict if the Argentine Government will be able to successfully renegotiate the debt held with private bondholders. There is uncertainty regarding the Argentine Government's ability to successfully stabilize the foreign exchange market, re-establish economic growth and comply with the SBA terms. Additional depreciation of the Peso against the U.S. Dollar, a breach of the terms of the SBA and the potential failure of the Argentine Government in the renegotiation of the debt may adversely affect the Argentine economy and, in turn, our business, financial situation, operational results and the value of our ADSs and our common shares. We cannot affirm that a decrease in economic growth, an increase in the economic instability or the expansion of the economic and political policies adopted in the future by the Argentine Government to control inflation and other macroeconomic imbalances that affect us and other companies from the private sector, will not have a material adverse effect on the Argentine economy, and, in turn, on our business, operational results and our growth perspectives.

As explained in other risk factors in this annual report, following the economic crisis of 2001-2002, the subsequent freeze on gas and electricity rates in Pesos and the significant devaluation of the Argentine Peso against the U.S. Dollar, there was a lack of investment in the supply and transport capacities of gas and electricity and, at the same time, demand for natural gas and electricity increased substantially. In response, the Macri administration announced several measures, including the revision of subsidy policies, Decree No. 134/2015 of December 16, 2015, which placed the national electricity system in a state of emergency until December 31, 2017 and Decree No. 367/2016 of February 16, 2016, which instructed the ministries, including the ME&M to continue the procedures related to the renegotiation of contracts related to the provision of public services and their RTI, among which are the distribution and transportation of gas and electricity. In relation to natural gas, prices with gas distributors began to be agreed upon in the spot market on a daily basis as from October 2018. Subsequently, ENARGAS Resolutions No. 280-289 and No. 292/18 were issued, which established, effective for a six-month period beginning October 1, 2018, the new natural gas final tariffs for SGP, CNG and residential users considering a price for natural gas as input ranging between US$1.74/MBTU y US$3.98/MBTU, including the differential tariff. Moreover, on February 2019, a tender was launched for the supply of natural gas to distribution companies on a firm basis to ToP and DoP up to 70% of the maximum daily volume, for a term of 12 months with seasonality terms, and effective as from April 2019. For the Noroeste Basin, 9.4 and 3.8 million m3 per day were assigned for the winter (April – September 2019) and summer (October 2019 – April 2020), respectively, at an average tender price of US$4.35/MBTU. For the rest of basins, 36.1 and 14.4 million m3 per day were assigned for the winter and the summer, respectively, at an average tender price of US$4.62/MBTU. We submitted an application and were awarded with the bid. Producers would bill to distribution companies in Ps. pursuant to ENARGAS Resolution No. 72/19, considering BNA's average currency nominal exchange rate for the first 15 days of the month immediately preceding the beginning of each seasonal period or, if lower, the nominal exchange rate stipulated in the agreements. However, the nominal exchange rate update which should have been implemented on October 1, 2019, applicable to the October 2019 - April 2020 summer seasonal period, was deferred on several occasions. With the entry into effect of the Social Solidarity and Productive Reactivation Law, the nominal exchange rate freeze was subjected to a maximum term of up to 180 days. ENARGAS Resolution No. 193-199, 201-202 and 205-207 /19 established gas tariff schemes effective as from April 2019, considering an average PIST price of gas as a raw material for the following 6 months ranging between US$2.14/MBTU and US$4.69/MBTU, including the differential tariff Later, 27% and 12% discounts in the price of natural gas within the PIST were set for the months of April and May 2019, respectively, by means of subsidies and, with the purpose of reducing monetary expenses for seasonal consumption, a 22% deferral on bills issued during the July – October 2019 period was approved, to be recovered in five installments as from December 2019. Later, the tariff scheme update corresponding to October 2019 was deferred until February 1, 2020 pursuant to SGE Res. No. 521, 751 and 791 /19 and, with the entry into effect of the Social Solidarity and Productive Reactivation Law, effective as from December 23, 2019, it was determined that tariffs under federal jurisdiction would remain unchanged and a process for an extraordinary review of the RTI would be initiated for a maximum term of 180 days. Regarding gas transportation, on March 27, 2018, ENARGAS issued Resolution No. 310/18 which implemented a 50% tariff increase applicable to natural gas transportation utility service of TGS, effective as from April 1, 2018. Subsequently, ENARGAS issued Resolution No. 265/2018 which implemented a 19.7% tariff increase effective as of October 1, 2018. Furthermore, ENARGAS Resolution No. 192/19 determined a 26.0% increase on account of costs variations effective as from April 2019. This increase was calculated based on the IPIM semiannual variation for the August 2018 – February 2019 period. Later, 22% of the amount of bills issued during the July – October 2019 period was deferred, to be recoverable in five installments as from December 2019, pursuant to SGE Resolution No. 336/19. The semiannual update which, according to the RTI, should have been applied since October 1, 2019, was deferred pursuant to several regulations. Finally, the tariff increase was suspended for a maximum term of up to 180 days since the entry into force of the Social Solidarity and Productive Reactivation Law on December 23, 2019. Moreover, this Law contemplates the possibility of performing an RTI review for a term of up to 180 days. See, "Item 4. Information on the Company-Our Interest in TGS." In relation to the distribution of electricity, on January 31, 2018, the ENRE issued Resolution No. 33/18 which approved the tariff scheme for Edenor to be applied as from February 1, 2018. Furthermore, such resolution approved the new adjustments to own distribution costs ("CPD") (last stage of 17% according to Resolution No 63/17, including the inflation adjustment of 11.9% for the period July 2017-December 2017 and a stimulus factor "E" of negative 2.51%) and determined the deferred income to be recovered in 48 instalments for a total amount of Ps.6,343.4 million. Additionally, it reported that the price of the average tariff reached Ps.2.4627/ KWh. See, "Item 4. Information on the Company- Our Distribution of Energy Business." In relation to the transmission of electricity, on February 19, 2018, the ENRE issued Resolutions No. 37/18 and No. 38/18, which were modified on April 5, 2018 by ENRE Resolutions No. 99/18 and No. 100/18 that adjusted Transener and Transba's remuneration by 24.15% and 23.39% for the December 2016 to December 2017 period, respectively, to be applied to the remuneration scheme as from February 2018. Subsequently, on November 16, 2018, the ENRE issued Resolutions No. 280/18 and No. 281/18, which adjusted Transener's and Transba's compensation by 42.55% and 43.25%, respectively, for the December 2016 to June 2018 period, to be applied to the remuneration scheme as from August 2018. As CAMMESA did not compute interest for the months of August and September 2018, Transener and Transba filed a claim before the ENRE and CAMMESA for the settlement of the applicable interest. On March 22, 2019, the ENRE issued Res. No. 67/19 and No. 68/19 updating Transener and Transba's remunerations by 78.41% and 81.26%, respectively, for the December 2016 – December 2018 period, effective as from February 1, 2019. On September 25, 2019, the ENRE issued Res. No. 269/19 and No. 267/19 updating Transener and Transba's remunerations by 112.41% and 115.75%, respectively, for the December 2016 – June 2019 period, retroactively to August 1, 2019. Notwithstanding the measures adopted by the Macri administration, the change of administration implied a radical change in governmental policies. One of the first measures of the Fernandez administration was to enact the Social Solidarity and Productive Reactivation Law, which, among other measures, established a 180-day freeze in energy and natural gas tariffs and the relaunching of RTIs and enabled the President to intervene before the regulatory authorities (ENRE and ENARGAS). Moreover, Resolution SE 31/2020 modified the power generation segment's remuneration scheme and established prices denominated in Argentine Pesos (formerly denominated in U.S. Dollars) and reduced such prices in different proportions according to the technology employed. For more information, please See "Item 4. The Argentine Energy Sector-Electricity Regulatory Framework". Therefore, there is uncertainty as to what other measures the Argentine Government may adopt in connection with tariffs, whether tariffs will be updated from time to time to reflect an increase in operating costs, and their impact on the Argentine economy and, consequently, on our business or operational results.

Prevailing hydrological conditions could adversely affect the operations of our hydroelectric generation plants owned by HINISA, HIDISA and HPPL, in a number of ways, which we cannot fully predict. For example, hydrological conditions that result in a low supply of electricity in Argentina could lead to, among others, the implementation of broad electricity conservation programs, including mandatory reductions in electricity generation or consumption. Hydrological conditions since 2006, the year in which our units recorded the greatest intake to date, have been poor. The worst conditions were registered in 2014, in which the water intake at HINISA and HIDISA available for electricity generation was 62% and 64% lower, respectively, as compared to 2006. A prolonged continuation of poor conditions could force the Argentine Government to focus its generation efforts on the use of other sources of electricity generation. In the event of electricity shortages, the Argentine Government could mandate the implementation of broad electricity conservation programs, including mandatory reductions in electricity generation or consumption; the Argentine Government could also mandate increased production from thermal plants that use fossil fuels as their generation sources and preserve the available water resources for future electricity generation. Although such a shift in production could benefit our thermal generation plants, it would negatively affect our hydroelectric plants and any mandated reduction in electricity generation or consumption could reduce revenues in our generation business and lead to a decline in our consolidated operational results, which may have a material adverse effect on our financial condition and the market value of our shares and ADSs. Moreover, in a case where the water level of the dams of our hydroelectric facilities decreases to the minimums established in the applicable concession contract, the local water authority (i.e. the Province of Mendoza and the Interjurisdictional Authority ("Autoridad Interjurisdiccional de Cuenca" or "AIC") would gain control of the amount of water that may be dispatched in order to assure the continuity of other water uses such as human consumption and irrigation.

Production from oil and gas fields declines as reserves are depleted, with the rate of decline depending on reservoir characteristics. Accordingly, the amount of proved reserves declines as these reserves are produced. The level of our future oil and natural gas reserves and production, and therefore our cash flows and income, are highly dependent on our success in efficiently developing current reserves, entering into new investment agreements and economically finding or acquiring additional recoverable reserves. While we have had success in identifying and developing commercially exploitable deposits and drilling locations in the past, we may be unable to replicate that success in the future. We may not identify any more commercially exploitable deposits or successfully drill, complete or produce more oil or gas reserves, and the wells that we have drilled and currently plan to drill may not result in the discovery or production of any further oil or natural gas. If we are unable to replace our current and future production, the value of reserves will decrease, and our operational results could be negatively affected, as well as our financial condition and operational results.

The possibility of replacing our crude oil and gas reserves in the future is dependent on our ability to access new reserves, both through successful exploration and reserve acquisitions. We consider exploration, which carries inherent risks and uncertainties, to be our main vehicle for future growth and reserves replacement. The exploration can only be carried out if the economic and operational prospects are feasible, such as pricing, demand, terms and conditions of sale, environmental impact, among other important factors. Without successful exploration activities or reserves acquisitions, our proved reserves would decline as our oil and gas production would be forced to rely on our current portfolio of assets. We cannot guarantee that our exploration, development and acquisition activities will allow us to offset the decline of our reserves. If we are not able to successfully find, develop or acquire sufficient additional reserves, our reserves and therefore our production may continue to decline and, consequently, this may adversely affect our future operational results and financial condition.

Oil and gas exploration and production activities are subject to particular economic and industry-specific operational risks, some of which are beyond our control, such as production, equipment and transportation risks, as well as natural hazards and other uncertainties, including those relating to the physical characteristics of onshore and offshore oil or natural gas fields. Our operations may be curtailed, delayed or cancelled due to bad weather conditions, mechanical difficulties, shortages or delays in the delivery of equipment, compliance with governmental requirements, fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards, such as oil spills, gas leaks, ruptures or discharges of toxic gases. If these risks materialize, we may suffer substantial operational losses or disruptions in our operations. Drilling may be unprofitable, not only with respect to dry wells, but also with respect to wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs are considered.

The sectors in which we operate are generally unionized across the country. As of December 31, 2019, 43.41% of our workforce was represented by unions under collective bargaining agreements. Although our relations with trade unions have been historically stable, we cannot assure that we or our operating subsidiaries will not experience work stoppages or disruptions in the future, which could have material adverse effects on our business and revenues. A primary reason for this is that our collective bargaining agreements are negotiated on an annual basis. As such, we are unable to guarantee the continuity of current terms and conditions in subsequent collective bargaining agreements, nor that we will not be subject to strikes or work stoppages before or during the negotiation process. If we are unable to negotiate salary agreements or are subject to strikes or work stoppages, our operations, financial condition and the market value of our shares and ADSs could be materially affected in an adverse way.

Edenor outsources a number of activities related to our distribution business to third-party contractors in order to maintain a flexible cost base. As of December 31, 2019, Edenor had approximately 5,588 third-party employees under contract in its distribution business. Although Edenor has very strict policies regarding compliance with labor and social security obligations by contractors, Edenor is not in a position to ensure that contractors will not initiate legal actions to seek indemnification from us based upon a number of judicial rulings issued by labor courts in Argentina which have recognized joint and several liability between the contractor and the entity to which it is supplying services under certain circumstances. We cannot make any assurances that such proceedings will not be brought against Edenor or that the outcome of such proceedings would be favorable to Edenor. If we were to incur material labor liabilities in connection with the outsourcing of our distribution business, such liabilities could have an adverse effect on our financial condition and consolidated operational results and the market value of our shares and ADSs.

We have executed several energy supply agreements with CAMMESA in which a breach of our commitments allows CAMMESA to apply penalties to us that may adversely affect the revenues derived from such contracts, such as: (i) a breach of the availability commitments set forth in our WEM supply agreements under SE Resolution No. 220/2007, SEE Resolution No. 21/2016 and SEE Resolution 287/17 allows CAMMESA to apply penalties to us that may adversely impact the revenues derived from such agreements, which in turn may adversely affect our results. Moreover, under the WEM supply agreement under SEE Resolution 287/17 for the Genelba Plus Combined Cycle, a breach of the obligation to enter into commercial operations by a specified date entitles CAMMESA to apply penalties that may adversely impact the revenues derived from such agreements, which in turn may adversely affect our operational results. If the delay in the entry into commercial operations extends for more than 180 days from the specified date, the relevant PPAs may be automatically terminated by CAMMESA who may enforce the performance guarantee granted under such contract. In such event the project will be remunerated according to the general WEM remuneration scheme and therefore could negatively impact our operational results. (ii) a breach of the energy delivery commitments set forth in Greenwind's PPA allows CAMMESA to apply penalties to the generator that may adversely impact the revenues derived by the generator from such agreements and, ultimately, result in the obligation to sell the assets involved in the operation of the wind farm, which in turn may adversely affect our results. (iii) A breach of PEPE IV obligations to enter into commercial operations by the committed date in the process for obtaining the priority dispatch as established in Resolution ME&M No. 281-E/17 may result in the enforcement of the performance guarantees granted in connection with these projects. On November 2019, CAMMESA initiated the enforcement procedure. However, the parties have reached an agreement to suspend such procedure until April 30, 2020. See "Item 4. Our Generation Business-Renewable Energy".

During certain times of the year, more electricity can be generated than can be transmitted. While under the remuneration scheme established by SEE Resolution No. 19/2017, such transmission constraints should not affect the price that is paid to the generator, nonetheless our dispatch may be affected. We cannot make any assurance that required investments will be made to increase the capacity of the transmission system. As a result of lower dispatch, our generation business may record lower operating profits than we anticipate, which could adversely affect our consolidated operational results and financial condition and the market value of our shares and ADSs.

From 2013 through 2018, electricity demand in Argentina increased by 6%, which in part reflects the relative low cost, in real terms, of electricity to users due to the freezing of distribution margins, the establishment of subsidies in the purchase price of energy and the elimination of the inflation adjustment provisions in distribution concessions coupled with the devaluation of the Peso and inflation through 2018. We cannot make any assurances that tariff increases made under the previous administration or any future increases in the cost of electricity will not have a material adverse effect on electricity demand or result in a decline in collections from users. In this respect, we cannot assure that these measures or any future measure will not lead electricity companies, like Edenor, to record lower revenues and operational results, which may, in turn, have a material adverse effect on the market value of our ADSs.

On several occasions, the Argentine Government implemented laws and collective bargaining agreements that compelled employers of the private sector to maintain certain salary levels and to bring additional benefits to their employees. Employers have suffered great pressure from their employees and the unions to grant increases in wages and other benefits. There are possibilities that in the future, the Argentine Government may issue regulations and/or adopt policies or measures that imply increases in the minimum wage (salario mínimo, vital y móvil) and/or in benefits, indemnities, compensations and other labor costs that the employers may face. Every increase in wages or any other labor related cost may increase our costs and reduce the results of our operations. For more information, please see "We employ a largely unionized labor force and could be subject to organized labor action, including work stoppages that could have a material adverse effect on our business" below.

The prices that we are able to obtain for our hydrocarbon products affect the viability of investments in new exploration and development activities, and as a result, the timing and amount of our projected capital expenditures for such purposes. We budget capital expenditures by considering, among others, the market prices for our hydrocarbon products. In the event that current domestic prices decrease, the ability to improve our hydrocarbon recovery rates, identify new reserves and carry out certain other capital expenditure plans is likely to be affected, which, in turn, could have an adverse effect on our operational results. In the context of the coronavirus pandemic crisis, Russia broke the agreement it had with Saudi Arabia in the internal dispute for oil production and, in response, Saudi Arabia lowered the price of oil to less than US$30 per barrel, levels that have not been seen for 16 years. Moreover, the United States oil prices traded below zero for the first time ever, and producers and traders were essentially paying other market participants to take their oil. For more information, please see ("-Developments relating to the novel coronavirus may have a material adverse impact on our business operations, financial condition or results of operations") and "Item 4-Relevant Events- Measures Designed by the Argentine Government to Address the Covid-19 Outbreak" and "Impact of the COVID-19 outbreak on our Operations". ".

We carry insurance policies that are consistent with industry standards in each of our different business segments. Although we believe our insurance coverage is commensurate with international standards, no assurance can be given of the existence or sufficiency of risk coverage for any particular risk or loss both in our ongoing businesses or in the construction stages of our ongoing or future projects. If an accident or other event occurs that is not covered by our current insurance policies in any of our business segments or projects, we may experience material losses or have to disburse significant amounts from our own funds, which may have a material adverse effect on our net profits and our overall financial condition and the market value of our shares and ADSs.

As of December 31, 2019, Edenor's physical assets were insured for up to US$1,604.3 million. However, Edenor does not carry insurance coverage for losses caused by its network or business interruption, including for the loss of Edenor's concession. Although Edenor believes its insurance coverage is commensurate with standards for the distribution industry, no assurance can be given of the existence or sufficiency of risk coverage for any particular risk or loss. If an accident or other event occurs that is not covered by Edenor's current insurance policies, Edenor may experience material losses or have to disburse significant amounts from its own funds, which may have a material adverse effect on our financial condition and consolidated operational results and the market value of our shares and ADSs.

Edenor's distribution concession does not allow our energy distribution business to pass on to Edenor's users the cost of additional energy purchased to cover any energy losses that exceed the loss factor contemplated by the concession, which is, on average, 10%. As a result, if our energy distribution business experiences energy losses in excess of those contemplated by the concession, we may record lower operating profits than we anticipate. Prior to the 2001 and 2002 economic crisis in Argentina, Edenor was able to reduce the high level of energy losses experienced at the time of the privatization down to the levels contemplated (and reimbursed) under the concession. However, during the last years, Edenor's level of energy losses, particularly Edenor's non-technical losses, started to grow again, in part as a result of the increase in poverty levels and, in turn, in the number of delinquent accounts and fraud. Although Edenor continues to make investments to reduce energy losses, these losses continue to exceed the average 10% loss factor contemplated by the concession, and based on the current tariff schedule and the economic turmoil, we do not expect these losses to decrease in the near term. Energy losses in our distribution business amounted to 19.9% in 2019, 18.2% in 2018 and 17.1% in 2017. We cannot affirm that energy losses will not continue to increase in future periods, which may lead to lower margins in our distribution segment and could adversely affect our financial condition and consolidated operational results and the market value of our shares or our ADSs.

If we do not comply with the requirements of the Energy Plus Program (SE Resolution No. 1281/2006) or if such program is modified or canceled, the non-compliant party would have to sell the production on the spot market, and also, eventually, under the remuneration scheme applicable to the spot market, which could affect our revenues. In October 2015, CAMMESA issued Note No. B-102407-4, pursuant to which it mandated us to sell our uncommitted production under the Energy Plus Program to the spot market under the price scheme established by SE Resolution No. 482/2015 (currently SE Resolution 31/2020). In Note No. 567/07, as amended, the SE established the CMIEE as a maximum fee for WEM Large Users for their surplus demand in the event that they do not have their demand backed with a contract under the Energy Plus Program. As of the date of this annual report, the CMIEE applicable to GUMAs and GUMEs is equal to the higher between 1200 Ps./MWh or the temporary dispatch surcharge and for GUDIs of 0 Ps./MWh. The CMIEE implies an indirect maximum limit to the price that generators under the Energy Plus Program may charge. The detrimental effect that such limits could have on our generators could be exacerbated if the Peso continues to devalue. As a consequence, if the CMIEE is not adjusted or a higher devaluation of the Peso occurs, this could result in a decline in prices charged by our generators under their Energy Plus Program contracts or in a discontinuance of the Energy Plus contracts, forcing such generators to sell the capacity and energy unsold in the spot market at lower prices.

The Company has guaranteed in due time and form the fulfillment of payment obligations and commercial obligations of some of its affiliates. In the event that the affiliates do not comply with the obligations assumed, the guarantees granted by the Company could be enforced in accordance with their terms and conditions. As of the date of this annual report, no breaches have occurred that triggered the guarantees, but the Company cannot assure that they will not occur in the future. Such breaches may have an adverse effect on our operational results.

In recent years, we participated in the Gas Plan I (as defined below) and the Gas Plan II (as defined below). Companies that participate in the Gas Plan I and the Gas Plan II agree to a Base Volume to be sold at a fixed Base Price and receive between US$4.00 and US$7.50 per million BTU (depending on the production level, the "Surplus Price") for any amount of natural gas produced in excess of the Base Volume (the Surplus Injection). The Argentine Government agrees to compensate participating companies, on a monthly basis, for: (i) any difference between the Surplus Price and the price actually received for the sale of the Surplus Injection and (ii) any difference between the Base Price and the price actually received for the sale of the Base Volume. In connection with these government programs, we received US$7.50 per million BTU from the Argentine Government for the volume of natural gas that we produced in excess of the agreed threshold. As of the date of this annual report, we had only collected payments from the Argentine Government for December 2016 and three months of 2017. The Gas Plan I and the Gas Plan II of Pampa finished on December 31, 2017 and June 31, 2018 respectively. On April, 3, 2018, ME&M Resolution No. 97/18 was issued approving the procedure to cancel the outstanding compensation and/or payments as of December 2017, regarding the Gas Plan I, Gas Plan II and Gas Plan III (as defined below). On May 2, 2018, we adhered to this procedure for the cancellation in 30 equal consecutive installments, payable as from January 1, 2019, of the amounts owed under the following programs: (i) Gas Plan I (Resolution No.1/13); (ii) the Gas Plan II (SE Resolution No. 60/13); and (iii) the Gas Plan III (ME&M Resolution No. 74/16). On February 21, 2019, SGE Resolution No. 54/19 was published, cancelling the obligations arising from the provisions of the ME&M Resolution No. 97/18 through the issuance of public debt instruments. Consequently, on February 26, 2019, joint Resolution No. 21/2019 of the Secretariat of Finance and the Secretariat of Treasury was published, which provided for the issuance of Natural Gas Program Bonds denominated in US$, issued on February 27, 2019, for a term of two years and four months, without interest and with an amortization of 29 monthly and consecutive installments, the first installment representing 6.66% of the original nominal value, the following 18 installments representing 3.33% of the original nominal value and the remaining ten installments representing 3.34% of the original nominal value. Pampa adhered to the terms and scope of SGE Resolution No. 54/19 (see "Item 4-Our Business-The Argentine Energy Sector- OIL & GAS REGULATORY FRAMEWORK- Gas Market Regulatory Framework" and Relevant Events - Oil and Gas-Modifications to the Unconventional Gas Plan - Resolution No.46-E/17). This resolution keeps 85% of the Argentine Government debt denominated in U.S. dollars, despite the billing in Pesos described above, reducing our currency devaluation risk. We face the risk of the Argentine Government suspending or further delaying remaining payments due under Resolution No. 97/18, which would negatively affect our financial condition and operational results.

The "Hydrocarbons Law" (as amended by Law No. 27,007) provides for oil and gas concessions to remain in effect for 25, 30 or 35 years, depending on the concession, as from the date of their award, and further provides for the concession term to be extended for periods of ten additional years, subject to terms and conditions approved by the grantor at the time of the extension. The authority to extend the terms of current and new permits, concessions and contracts is of the province in which the relevant area is located (and the Argentine Government in respect of offshore areas beyond 12 nautical miles). In order to be eligible for an extension, any concessionaire and permit holder must (i) have complied with its obligations under the Hydrocarbons Law and the terms of the particular concession or permit, including evidence of payment of taxes and royalties, the supply of the necessary technology, equipment and labor force and compliance with various environmental, investment and development obligations, (ii) be producing hydrocarbons in the relevant concession area and (iii) submit an investment plan for the development of the areas as requested by the relevant authorities at least one year prior to the expiration of the original concession. In addition, concessionaires that request extensions under Law No. 27,007 have to pay additional royalties ranging from 3% to a maximum of 18%. Under the Hydrocarbons Law, non-compliance with these obligations and standards may also result in the imposition of fines and in the case of material breaches, following the expiration of applicable cure periods, the revocation of the concession or permit. We cannot assure you that our concessions will be extended in the future as a result of the review by the relevant authorities of the investment plans submitted for such purposes, or that additional requirements to obtain such concessions or permits will not be imposed. Hydrocarbon activities (including, exploitation, industrialization, transportation and commercialization) in the territory of Argentina are deemed of "national public interest." We cannot assure you that any measures that may be adopted by the Argentine Government to secure Argentina's self-sufficiency in oil and gas supply will not have a material adverse effect on the Argentine economy and, as a consequence, adversely affect our financial condition, our operational results and the market value of our shares and ADSs.

Since December 2011, the Argentine Government has adopted from time to time a number of measures concerning the repatriation of funds obtained from oil and gas exportation and charges applicable to the production of liquid gas, which have affected the oil and gas business. Beginning in April 2012, the Argentine Government provided for the nationalization of YPF and imposed major changes to the system under which oil companies operate, principally through the enactment of Law No. 26,741, Decree No. 1277/2012 and Law No. 27,007. Further changes in such regulations may increase the adverse effect of such measures on the business, revenues and our result of operations and financial condition.

In recent years, due to regulatory, economic and government policy factors, domestic crude oil, gasoline, diesel and other fuel prices have differed substantially from the prices for such products prevailing on the international and regional markets, and the ability to increase or maintain prices to adjust to international price or domestic cost variations has been limited. International crude oil and related oil product prices have declined significantly from the second half of 2014 through December 2017. On August 15, 2019, Decree No. 566/19 established that, for a period of ninety days: (i) deliveries of crude oil in the local market must be invoiced and paid by applying a reference exchange rate of Ps.45.19/US$ and a reference price of Brent crude oil of US$59/barrel; (ii) the prices of gasoline and diesel sold locally cannot exceed the current price as of August 9, 2019; and (iii) hydrocarbon producing companies, refineries and retail companies must supply the national demand for crude oil and liquid fuels, respectively, at the established prices. Regarding natural gas, revenues we obtain as a result of selling natural gas in Argentina are subject to government regulations and could be negatively affected, particularly considering the evolution of gas prices for residential consumers, which in turn are still subject to subsidies, and the evolution of sale price to electric generation plants. This situation, in addition to CAMMESA's bidding processes, which promoted strong competition in the demand of power generation plants, had a sensitive effect on the demand for the remaining segments, generating a lower quantity of firm commitments and/or contracts for shorter terms. We cannot assure that in the future new regulations on local oil prices will not be applied. We cannot assure that we will be able to maintain or increase the domestic prices of our products, and limitations on our ability to do so could adversely affect our financial condition and operational results. Similarly, we cannot affirm that hydrocarbon prices in Argentina will track increases or decreases in hydrocarbon prices in the international or regional markets. Discrepancies between domestic and international prices may adversely affect our financial condition and operational results.

The Argentine Government has reestablished restrictions on the conversion of Argentine currency into foreign currencies and on the remittance to foreign investors of proceeds from their investments in Argentina. Conversion of dividends, distributions, or the proceeds from any sale of shares from Pesos into U.S. Dollars, as well as the transfer of those funds abroad is strongly limited (See "Item 10. Additional Information-Exchange Controls"). Future restrictions on the movement of capital to and from Argentina such as those that previously existed could, if reinstated, impair or prevent the conversion of dividends, distributions, or the proceeds from any sale of shares, as the case may be, from Pesos into U.S. Dollars and the remittance of such U.S. Dollars abroad. Also, certain of our indebtedness includes covenants limiting the payment of dividends. We cannot assure you that the Argentine Government will not take similar measures in the future. In such a case, the depositary for the ADSs may hold the Pesos it cannot otherwise convert for the account of the ADS holders who have not been paid. In addition, any future adoption by the Argentine Government of restrictions on the movement of capital out of Argentina may affect the ability of our foreign shareholders and holders of ADSs to obtain the full value of their shares and ADSs and may adversely affect the market value of our shares and ADSs.

In February 2011, the former Argentine Ministry of Industry issued Resolution No. 45/11, which, among other things, decided to extend the applicability of non-automatic permits regarding imports of products considered as luxury goods or that compete in a non-loyal manner with domestic production, in accordance with the aforementioned Ministry's criteria. The Argentine Government issued Resolution No. 45/11 considering that domestic production was able to satisfy the domestic demand. On January 25, 2013, the Ministry of Economy issued Decree N° 11/13 which abolished Resolution No. 45/11, ending with the system that compelled importers to request an authorization to import certain products to the country. On January 8, 2020, the Secretariat of Industry, Knowledge Economy and Foreign Commercial Management (Secretaría de Industria, Economía del Conocimiento y Gestión Comercial Externa) issued Resolution No. 1/20 which: (i) incorporated new tariff items that must file for non-automatic licenses (NAL); (ii) modified the forms that needed to be presented to request import licenses; (iii) decreased the tolerance in the FOB unitary value of merchandises subject to filing for NAL; (iv) decreased the validity of the NAL from 180 days to 90 days counted from their approval in the SIMI; (v) extended the scope of merchandise imports to Isla Grande de la Tierra del Fuego (creating an exception for products entering from continental territory); and (vi) established the Sub-Secretariat of Politics and Commercial Management of the Secretariat of Industry, Knowledge Economy and Foreign Commercial Management as authority. As of the date of this annual report, we cannot guarantee that the Argentine Government will not implement similar measures in the future. Those measures may affect goods that we use as inputs, causing an adverse effect on our business, our financial condition and operational results.

There are restrictive conditions currently applicable in Argentina that affect corporations' ability to access the MULC to acquire foreign currency to transfer funds to other countries, service debt, make payments outside Argentina and other operations, requiring, in some cases, prior approval by the Central Bank. These restrictions may affect our operations and our expansions projects, as they require the import of services and goods for which payment may be restricted. The Argentine Government may impose or create further restrictions on the access to the MULC. In such case, the possibility of Argentine corporations to make payments outside Argentina and to comply with their obligations and duties may be affected. We cannot predict how such current restrictions may evolve after this annual report, mainly regarding limitations to transfer funds outside the country. The Argentine Government may impose further exchange controls or restrictions to capital transfers and modify and adopt other policies that may limit or restrict our ability to access international capital markets, to make payments of principal and interest and other additional amounts outside the country (including payments relating to our notes), or affect in other ways our business and our operational results, or cause the market value of our ADSs and our common shares to decline. Exchange controls in an economic environment in which the access to local capital markets is restricted may cause an adverse effect in our activities, mainly in our ability to make payments of principal and/or interest of our notes in foreign currency. For more information, please see "Item 10. Additional Information – Exchange Control" below.

On March 1, 2002, the Argentine Government imposed a withholding tax on exports of hydrocarbons, initially lasting five years, which was subsequently extended through 2017. This tax framework prevented us from benefiting from significant increases in international prices for oil, oil related products and natural gas, hindered us from offsetting sustained increases in costs related to the energy industry, and materially affected our competitiveness and operational results. On January 6, 2017, the Argentine Government did not extend the resolutions that imposed a withholding tax on exports of hydrocarbons. On August 22, 2018 the Argentine Government issued a new Natural Gas Exportation Procedure regulating the process to obtain the authorizations needed to export natural gas. Afterwards, on September 4, 2018, the Argentine Government published Decree No. 793/2018 which imposed an exportation duty on several goods including natural gas until December 31, 2020. The exports duty consists of a Ps. 4 tax on every US$1.00 worth of exports, with a maximum tax rate of 12% on the value of exports. Thereafter, the Social Solidarity and Productive Reactivation Law modified the prior exportation duties for hydrocarbons that are commercialized in the external market. We cannot affirm that the Argentine Government will not create new export and import regulations or amend the ones currently in place. We cannot predict the impact that any such changes may have on our operational results and financial condition.

We conduct a material part of our businesses pursuant to public concessions granted by the Argentine Government. These concessions contain several requirements regarding the operation of those businesses and compliance with laws and regulations. Compliance with our obligations under our concessions is, in certain cases, secured by a pledge of our shares in the concessionaires in favor of the Argentine Government. Accordingly, upon the occurrence of specified events of default under these concessions, the Argentine Government would be entitled to foreclose on its pledge of the concessionaire and sell our shares in that concessionaire to a third party. Such sale would have a severe negative impact on our ability to operate a material portion of our business, and as a result, our operational results would be materially adversely affected. Finally, our concessions also generally provide for termination in the case of insolvency or bankruptcy of the concessionaire. If any of our concessions are terminated or if the Argentine Government forecloses its pledge over the shares we own in any of our concessionaire companies, such companies could not continue to operate as a going concern, and in turn our consolidated operational results would be materially adversely affected and the market value of our shares and ADSs could decline.

Historically, the Argentine Government has exerted a significant influence on the economy, including the energy sector, and companies such as us that operate in such sector have done so in a highly regulated context that aims mainly at guaranteeing the supply of domestic demand. To address the Argentine economic crisis in 2001 and 2002, the Argentine Government adopted the Public Emergency Law No. 25,561 and other regulations, which made a number of material changes to the regulatory framework applicable to the electricity sector. These changes severely affected electricity generation, distribution and transmission companies and included the freezing of nominal distribution margins, the revocation of adjustment and inflation indexation mechanisms for tariffs, a limitation on the ability of electricity distribution companies to pass on to the user increases in costs due to regulatory charges and the introduction of a new price-setting mechanism in the WEM which had a significant impact on electricity generators and generated substantial price differences within the market. From time to time, the Argentine Government intervened in this sector, by, for example, granting temporary nominal margin increases, proposing a new social tariff regime for residents of poverty-stricken areas, removing discretionary subsidies, creating specific charges to raise funds that were transferred to government-managed trust funds that finance investments in generation and distribution infrastructure and mandating investments for the construction of new generation plants and the expansion of existing transmission and distribution networks. On January 27, 2017, the SEE issued Resolution No. 19/2017 which modified the remuneration scheme approved by Resolution No. 22/2016, improving the revenue of generators. See "Item 4. The Argentine Energy Sector-Remuneration Scheme for Generation Not Covered by Contracts-SEE Resolution No. 19/2017: February 2017 - February 2019". In 2019, the SRRYME issued Resolution No. 1/19 establishing a new remuneration scheme for energy generation. This new regime has, in general, a negative impact on the revenues of generating units that do not have the benefit of a special regime (e.g. Energía Plus or MATER) or a contract with CAMMESA, particularly, over older TG and TV units (such as those that are installed in CPB and CTG), as it has decreased the prices for capacity and generated/operated energy. Moreover, the new regime introduced a 50% discount on the capacity and energy remuneration in the event that the generator had assumed its own supply of fuel and, when dispatched, lacked such fuel. We cannot assure that future remuneration scheme will not have an adverse effect on our operational results. Regarding the spot price for electricity power, on February 27, 2020, the Secretariat of Energy issued Resolution No. 31/20, which modified –retroactively, from February 1, 2020 onwards certain aspects of the remuneration scheme established by Resolution (SRRYME) No. 1/19. On November 28, 2017, through Resolution SEE No. 1085/17, a new scheme that transferred the cost of electricity transport to the users was enacted. Generators pay for the connection and operation costs of their own connection through a special charge determined by the SEE. During 2017, the Argentine Government, through the relevant agencies, enacted several resolutions to establish the penalties regime and adjust tariffs. On February 1, 2017, the RTI process was completed and a new tariff scheme for the following five-year period was enacted. However, the aforementioned Social Solidarity and Productive Reactivation Law (Law 27,541) established a new tariff revision. Notwithstanding the recent measures adopted, we cannot assure you that certain other regulations or measures that may be adopted by the Argentine Government will not have a material adverse effect on our business and operational results or on the market value of our shares and ADSs or that the Argentine Government will not adopt further emergency legislation, or other similar regulations in the future that may increase our obligations, including increased taxes, unfavorable alterations to our tariff structures or remuneration scheme and other regulatory obligations, compliance with which would increase our costs and may have a direct negative impact on our operational results and cause the market value of our ADSs and our common shares to decline.

As of the date of this annual report, several Argentine businesspersons, mainly associated with public works projects, and former government officials of the Kirchner administration are being investigated for inappropriate gifts and unlawful association. On September 17, 2018, prosecution for unlawful association began against the former president –and current Vice-president – of Argentina, Cristina Elisabet Fernández de Kirchner and several businesspersons. Depending on the results of such investigations and the time it takes to complete them, the companies involved could face, among other consequences, a decrease in their credit rating, claims from their investors, as well as restrictions on financing through capital markets. These adverse effects could hinder the ability of these companies to meet their financial obligations on time. In relation to the above, the lack of future financing for these companies could affect the realization of the projects or works that are currently in execution. Likewise, the effects of these investigations or any future investigation could affect the levels of investment in infrastructure in Argentina, as well as the continuation, development and completion of public works projects and public-private participation projects (PPP), which could ultimately lead to lower growth of the Argentine economy. We cannot estimate the impact that these investigations could have on the Argentine economy. Similarly, it is not possible to predict the duration of the corruption investigations, nor which other companies might be involved or how far-reaching the effects of these investigations might be, particularly in the energy sector, or if there will be any other future investigations in this or other industry, which may negatively impact the Argentine economy. In turn, the decrease in investor confidence resulting from any of these, among other issues, could have a significant adverse effect on the growth of the Argentine economy, which could, in turn, harm our business, our financial condition and operational results and affect the trading price of our common shares and ADSs.

CPB uses seawater to refrigerate its generation units. According to applicable provincial law, such activity requires a concession to be granted by the provincial government. CPB consulted the regulatory authorities who informed that, according to their files, no such concession has been granted to CPB. The penalties for such infringement may vary from the application of a maximum Ps.50,000 fine to the closing of the plant. While CPB considers that the likelihood of any such penalties being imposed is low, we cannot assure you that the operation of CPB would not be affected if such penalties were to be imposed.

At the time of CPB's privatization in 1997, the Province of Buenos Aires agreed to expropriate and transfer to CPB the real property on which the plant was built and to create administrative easements in favor of CPB over the third-party lands through which a gas pipeline and an electricity transmission line run. Although the Province of Buenos Aires is in the process of expropriating the property on which the plant is built, as of the date of this annual report, it had not transferred all of the real property with clear and marketable title to CPB. In addition, the Province of Buenos Aires has not created the administrative easements for CPB's gas pipeline or the electricity transmission line. In July 2008, CPB sued the Province of Buenos Aires seeking the creation of the administrative easements in favor of CPB. CPB has received several complaint letters from third parties seeking compensation for the use of this land. If the Province does not complete the expropriation process or the administrative easement process, CPB may be exposed to judicial claims by third parties seeking compensation or damages for which we have not established a provision in our consolidated financial statements. If CPB were required to pay material damages or compensation for the right to use this real property as a result of adverse outcomes from legal proceedings, we could be required to use cash from operations to cover such costs, which could have a materially adverse effect on our financial condition and consolidated operational results and cause the market value of our ADSs to decline. This risk extends to our thermal generation plant Ingeniero White ("CTIW") which is constructed on CPB's real property.