EDEMSA 9 month results

Andes Energia plc ("Andes")

(AIM:AEN)

Unaudited results for

Empresa Distribuidora de Electricidad de Mendoza Sociedad Anonima ("EDEMSA")

for the nine months ended 30 September 2011

EDEMSA, the electricity distributor for the province of Mendoza in which Andes has a 51 per cent. indirect interest, has published its financial results for the nine months ending 30 September 2011. This information, which has been prepared under Argentine GAAP and in Spanish, is available from the web-site of the Argentine Comision Nacional de Valores at www.cnv.gov.ar. This announcement sets out the unaudited financial information of EDEMSA for the same period prepared under IFRS in Argentine Pesos (AR$).

Financial Overview of EDEMSA

In the first nine months of 2011 EDEMSA reported a profit of AR$7 million, compared to a profit of AR$36 million in the first nine months of 2010. However, it should be noted that the 2011 finance costs include non-recurring costs of AR$12 million associated with the refinancing of the debt. Furthermore, the finance costs for the comparable period last year include a one-time gain of AR$21 million resulting from the Total Return Swap agreement ("TRS").

Sales for the first nine months of 2011 increased by AR$30 million over the first nine months of 2010, representing an increase of 6%. This increase is due mainly to the pass through of increases in energy costs and to a lesser extent an increase in energy demand and the rate adjustment in February 2011.

Gross profits in the first nine months were AR$145 million comparable to AR$145 million in the first nine months of 2010. Inflationary pressure resulted in operating profit dropping from AR$66 million to AR$31 million, but this should be considered in the context of the fact that current tariffs are those based on 2008 cost values. The main increases in costs arose in salaries and other employee related costs and the costs of third party services. The company recorded EBITDA of AR$53 million for the first nine months of 2011 compared to AR$87 million for the corresponding period last year.

It should also be noted that, further to the advisory agreement EDEMSA signed with MSO Andes Energia Argentina S.A. a wholly subsidiary of Andes, the income statement of EDEMSA for the nine months includes a charge of AR$6.4 million for these services. 

The highlight of the last quarter was the conclusion of a AR$144 million syndicated loan agreement. This facilitated the buy back and cancellation of the EDEMSA bonds then in issue and the termination of the TRS with Andes and will also allow us to accelerate the implementation of work plans and provide working capital. Finance costs for the period were AR$32 million compared to AR$30 million for the comparable period last year after adjusting the comparable period's costs for the one time surplus resulting from the TRS transaction referred above. As also noted above the finance costs for the period include non-recurring costs of AR$12 million associated with the debt refinancing.

Neil Bleasdale, EDEMSA President commented, "With a background of increasing costs, the delay in the approval of the implementation of the tariff-polynomial formula has impacted adversely our results for the period. However, we are still hopeful that this approval will be forthcoming before the end of the year. On the positive side the repurchase and cancellation of the EDEMSA bonds has changed the company's financial profile and eliminated our foreign currency exposure.".

(Rate of exchange at 30 September 2011 AR$4.21 to US$1.00)

balance sheet

(All amounts in Argentine Pesos)

income statement

(All amounts in Argentine Pesos)

statement of changes in shareholders' equity

(All amounts in Argentine Pesos)

cash flow statement

(All amounts in Argentine Pesos)

1. Basis of preparation

The report for the nine months ended 30 September 2011 is unaudited and has been prepared in accordance with International Financial Reporting Standards ("IFRS") on a basis consistent with the accounting policies used in the preparation of the financial information of the ultimate parent company, Andes Energia plc, for the year ended 31 December 2010.

Enquiries:

Andes Energia plc Tel :020 7495 5326

Luis Alvarez Poli, Chief Executive Officer

Nigel Duxbury, Finance Director

Arbuthnot Securities Tel: 020 7012 2000

Antonio Bossi

Ed Groome

Buchanana Tel: 020 7466 5000

Tim Thompson

Ben Romney