Annual Report and Financial Statements
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2018 Annual Report and Financial Statements 2018 Annual Report and Financial Statements BOARD OF DIRECTORS Chairman Marcos Marcelo Mindlin Index Vice-Chairman Gustavo Mariani Director Ricardo Alejandro Torres Damián Miguel Mindlin Gabriel Cohen Diana Mondino Santiago Alberdi 01 02 Carlos Tovagliari Diego Martín Salaverri Annual Report Consolidated Miguel Bein Financial Statements Alternate Director José María Tenaillon Mariano Batistella Glossary of Terms 8 Glossary of Terms 164 Pablo Díaz Isaac Héctor Mochón Consolidated Statement 168 of Comprehensive Income Nicolás Mindlin Brian Henderson Consolidated Statement 170 Victoria Hitce of Financial Position Enrique Luján Benítez María Carolina Sigwald Consolidated Statement 172 Mauricio Penta of Changes In Equity Consolidated Statement 174 of Cash Flows SUPERVISORY COMMITTEE Notes to the Consolidated 175 Statutory Auditor Germán Wetzler Malbrán Financial Statements José Daniel Abelovich Martín Fernández Dussaut Alternate Statutory Auditor Marcelo Héctor Fuxman Tomás Arnaude 03 04 AUDIT COMMITTEE Report of 320 Contact 324 Regular Member Carlos Tovagliari Diana Mondino Independent Miguel Bein Auditors Alternate Member José María Tenaillon Isaac Héctor Mochón Enrique Luján Benítez 01 Annual Report Contents Glossary of Terms 8 01. 2018 Results and Future Outlook 12 02. Corporate Governance 18 03. Our Shareholders / Stock Performance 25 04. Macroeconomic Context 28 05. The Argentine Electricity Market 30 06. The Argentine Oil and Gas Market 54 07. Relevant Events for the Fiscal Year 69 08. Description of Our Assets 90 09. Human Resources 118 10. Corporate Responsibility 121 11. Information Technology 126 12. Quality, Safety, Environment and Labor Health 127 13. Results for the Fiscal Year 131 14. Dividend Policy 145 ANNUAL REPORT 2018 15. Board of Directors’ Proposal 146 To the shareholders of Pampa Energía S.A. (‘Pampa’, the ‘Company’ or the ‘Group’): Pursuant to the statutory rules and Bylaws currently in force, we submit to your Appendix I: Corporate Governance Report 147 consideration the Annual Report and Financial Statements for the 75th fiscal year ended December 31, 2018. 6 PAMPA ENERGÍA | ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 ANNUAL REPORT TERM DEFINITION Glossary of Terms Dam3 Cubic decameters DIGO Guaranteed Availability Commitments DisTro High-Voltage Electric Power Transmission System and/or Main Distribution D Electric Power Transmission System DoP Deliver or Pay TERM DEFINITION E&P Exploration and Production +GC Panel ByMA’s Corporate Governance Plus Panel EBISA Emprendimientos Energéticos Binacionales S.A. + EBITDA Earnings before interest, tax, depreciation and amortization EcoEnergía EcoEnergía Co-Generation Power Plant ABOL Argentine Business Organizations Law No. 19,550 Edenor Empresa Distribuidora y Comercializadora Norte S.A. ADRs/ADSs American Depositary Receipts Eg3 EG3 Red S.A. ANSES Administración Nacional de la Seguridad Social (National Social Security ENARGAS Ente Nacional Regulador del Gas (National Gas Regulatory Entity) A Administration) E ENARSA / IEASA Integración Energética Argentina S.A. (former Energía Argentina S.A.) AR$ Argentine Pesos Energía Plus Energía Plus Program, SE Res. No. 1,281/06 ENIM Ente Autárquico Intermunicipal de Cutral Có y Plaza Huincul (Cutral Có and Plaza Huincul Intermunicipal Autonomous Entity) Bbl Barrel ENRE Ente Nacional Regulador de la Electricidad (National Electricity Regulatory Entity) BCRA Banco Central de la República Argentina (Central Bank of the Republic ExxonMobil ExxonMobil Exploration Argentina S.R.L. of Argentina) BNA Banco de la Nación Argentina (Argentine National Bank) BO Boletín Oficial (Public Gazette) FGS Fondo de Garantía de Sustentabilidad del ANSES (Sustainability Guarantee B Board of Directors Pampa Energía’s Board of Directors Fund of ANSES) Boe Barrels of oil equivalent FO Fuel Oil BOPS Bi–orientated polystyrene FOCEDE Fondo de Obras de Consolidación y Expansión de Distribución Eléctrica (Fund BTU British Thermal Unit for Electricity Distribution Expansion and Consolidation Works) Bylaws Pampa Energía’s Bylaws FODER Fondo para el Desarrollo de Energía Renovables (Fund for the Development of ByMA Bolsas y Mercados Argentinos (Buenos Aires Stock Exchange) F Renewable Energies) FONINVEMEM Fondo para Inversiones Necesarias que permitan incrementar la oferta de energía eléctrica en el Mercado Eléctrico Mayorista (Fund for Investments CAMMESA Compañía Administradora del Mercado Eléctrico Mayorista S.A. (Argentine required to increase the Power Supply in the Electricity Wholesale Market) Wholesale Electricity Market Clearing Company) Foundation Fundación Pampa Energía CAU Cargo de Acceso y Uso (Access and Use Position) FS Financial Statements CBs Corporate Bonds CC Combined Cycle CEE Comité Ejecutivo de Emergencia (Emergency Executive Committee) Gas Plus Natural Gas Production Promotion Program, SE Res. No. 24/08 CEO Chief Executive Officer GB Great Britain CFO Chief Financial Officer GDP Gross Domestic Product CH Hydroelectric power plant GE General Electric CIESA Compañía de Inversiones de Energía S.A. GO Gas Oil (Diesel Oil) Citelec Compañía Inversora en Transmisión Eléctrica Citelec S.A. Government / National Federal Government of the Republic of Argentina CMA Capital Market Act No. 26,831 Administration / Federal CNG Compressed Natural Gas Government C CNV Comisión Nacional de Valores (National Securities and Exchange G GS Gas Stations Commission) GT Gas turbine Code Pampa’s Code of Corporate Governance GU Large Users CPB Central Piedra Buena S.A. GUDI Large Distribution Company Users CPD Costo Propio de Distribución (Own Distribution Cost) GUMA Major Large Users CPI Consumer Price Index GUME Minor Large Users CSJN Corte Suprema de Justicia de la Nación Argentina (Supreme Court GWh Gigawatt-hour of Justice of the Republic of Argentina) GyP Gas y Petróleo de Neuquén S.A.P.E.M. CT Thermal power plant CTG Central Térmica Güemes S.A. HI Hydroelectric plants CTGEBA Central Térmica Genelba HIDISA Hidroeléctrica Diamante S.A. CTIW Central Térmica Ingeniero White HINISA Hidroeléctrica Los Nihuiles S.A. CTLL Central Térmica Loma De La Lata S.A. H HPPL Hidroeléctrica Pichi Picún Leufú CTP Central Térmica Piquirenda Hydrocarbon Investments National Plan for Hydrocarbon Investments’ Strategic Planning and CTPP Central Térmica Parque Pilar Committee Coordination Committee CVP Costo Variable de Producción (Variable Production Cost) 8 PAMPA ENERGÍA | ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 9 ANNUAL REPORT TERM DEFINITION TERM DEFINITION IAS International Accounting Standards QSELH Quality, Safety, Environment and Labor Health ICC International Chamber of Commerce ICSID International Centre for Settlement of Investment Disputes Q I IDB Inter-American Development Bank IFRS International Financial Reporting Standards IMF International Monetary Fund R&D Refining and Distribution segment INDEC Instituto Nacional de Estadística y Censos de Argentina (National Institute RBB Bahía Blanca Ricardo Eliçabe Refinery of Statistics and Censuses) RCD Campo Durán Refinery IPIM Wholesale Domestic Price Index RDSA Rivera Desarrollos S.A. Refinor Refinería del Norte S.A. R RENPER Registry of Renewable Electric Power Generation Projects KCal Kilocalories Res. Resolution / Resolutions kW Kilowatt RTI Integral Tariff Review K kWh Kilowatt-hour RTP Plant’s thermal reduction LNG Liquefied natural gas S&P Standard & Poor’s Global Ratings LPG Liquefied petroleum gas SADI Sistema Argentino de Interconexión (Argentine Electricity Grid) LU300 Large users with demands in excess of 300 kW SBR Styrene Butadiene Rubber LVFVDs Liquidaciones de Ventas sin Fecha de Vencimiento a Definir (Sales SE Former Secretariat of Energy L SEC Security and Exchange Commission Settlements with Maturity Date to be Defined) SEE Subsecretariat of Electric Energy (former Secretariat of Electric Energy) S Senior Management M. Mindlin, D. Mindlin, G. Mariani and R. Torres M3 Cubic meters SGE Government Secretariat of Energy (former MinEn) MAT Term Market SOX Sarbanes-Oxley Act MAT ER Term Market from Renewable Energy Sources SRH Subsecretariat of Hydrocarbon Resources (former Secretariat of MBTU Million BTUs Hydrocarbon Resources) MECON Ministry of Economy SRRYME Secretariat of Renewable Resources and Electricity Market Medanito La Pampa 25 de Mayo – Medanito Sudeste block, located in the Province of La Pampa ST Steam turbine MEGSA Gas Electronic Market MerVal Mercado de Valores de Buenos Aires (Buenos Aires Securities Market) M MEyM Former Ministry of Energy and Mining Telcosur Telcosur S.A. MinEn Former Ministry of Energy (former MEyM) TGS Transportadora de Gas del Sur S.A. MMC Cost Monitoring Mechanism TIBA Transportista Independiente Buenos Aires S.A. MTO Cash tender offer to the minority shareholdings of Petrobras Argentina TJSM Termoeléctrica José de San Martín MW Mega watt TMB Termoeléctrica Manuel Belgrano MWh Mega watt-hour TOE Ton of oil equivalent Ton Metric ton ToP Take or pay N.a. Not applicable T Trafigura Trafigura Ventures B.V. and Trafigura Argentina S.A. N/A Not available Transba Empresa de Transporte de Energía Eléctrica por Distribución Troncal de la NGL Natural Gas Liquids Provincia de Buenos Aires Transba S.A. N NYSE New York Stock Exchange Transelec Transelec Argentina S.A. Transener Compañía de Transporte de Energía Eléctrica en Alta Tensión Transener S.A. OCP Oleoducto de Crudos Pesados OED Organismo Encargado del Despacho (Agency in Charge of Dispatch) Unconventional Plan Gas Encouragement Program for the Investment in Development