Final Results

Andes Energia plc

("Andes" or the "Company")

Final Results for the year ended 31 December 2010

HIGHLIGHTS

Andes Energia plc ("Andes", "Company" and the "Group") the oil and gas, electricity distribution, hydro-electric power company in Argentina, with certain other exploration interests outside Argentina, is pleased to announce its results for the year ended 31 December 2010.

Financial

Operational

·; Acquisition of joint venture partner's interest in seven licence blocks after the year end

·; Acquisition of 24% interest in producing field with reserves after the year end

·; Continuation of geophysical studies and seismic reprocessing

·; Listing of shares on Buenos Aires Stock Exchange

·; Farm-in agreement with YPF for two blocks in the province of Neuquen

·; Increase in EDEMSA's EBITDA for the year ended 31 December 2010 to AR$118 million (US$30 million) from AR$68 million (US$18 million) in the previous year

·; Acquisition of rights in EDEMSA bonds with a face value of US$85.1 million

·; Full impact of increase in electricity tariffs for the third review period charged by EDEMSA by on average 12% on 1 August 2009 and 12% on 1 December 2009

Commenting on the results, Luis Alvarez Poli stated:

"We are very pleased with the results for the year and believe we are now in a strong position to accelerate the growth strategy of our oil and gas assets over the coming months, we look forward to updating the market throughout the year ahead."

For further information please contact:

Qualified Person Review

In accordance with AIM guidance for mining and oil and gas companies, Mr. Juan Carlos Esteban has reviewed the information contained in this announcement. Mr. Juan Carlos Esteban, an employee of the Group, is a petroleum engineer with over 20 years of experience and is a member of the SPE (Society of Petroleum Engineers).

Annual Report

The Company plans to post a copy of the audited annual report for the year ended 31 December 2010 together with a notice of Annual General Meeting, to be held at the offices of Nabarro LLP at Lacon House, 84 Theobald's Road, London WC1X 8RW at 10.00a.m. on 29 June 2011, by 31 May 2011 and the report and notice will be available from the Group' website at www.andesenergiaplc.com.ar at that time.

CHAIRMAN'S STATEMENT

Overview

Our 2010 financial results incorporating the results of Andes together with its subsidiaries for the year ended 31 December 2010 are set out below.

The Group recorded a profit before tax of US$22 million on revenue of US$171 million for the year compared to a profit before tax of US$4 million on revenue of US$139 million in 2009. This revenue increase results primarily from the EDEMSA tariff increase, the pass through of increases in the cost of energy purchased and an increase in demand. During the year EDEMSA and the investment trust established by EDEMSA acquired the rights over EDEMSA bonds with a face value of US$85.1 million. A surplus of AR$21 million (US$5.4 million), resulting from the net present value impact of the reduction in borrowings has been recognized in the income statement for the period under finance costs. The profit after tax attributable to equity shareholders was US$4 million compared to a loss of US$1 million in 2009. Basic and diluted earnings per share was 3.55 cents for the year compared to a basic and diluted loss per share of 0.45 cents in 2009. In line with the dividend policy set out in the Group's re-admission document, no dividend is proposed.

The results of HASA, our hydroelectric power plant, continue to benefit from the change in the regulations implemented in October 2008 that now allows HASA to sell all the electricity it generates to the wholesale market.

We continue to advance the development of our oil and gas strategy and our main focus for the balance of 2011 is to formalise agreements and a work program that will hopefully allow us to maximise the potential of the licences we hold.

Outlook

We are very pleased with the results for the year. The repurchase of the debt has significantly changed the financial profile of EDEMSA, improving and reducing credit risk exposure and decreasing exposure to foreign exchange risk. However, it is important that the implementation of a tariff polynomial formula, that recognises costs in real terms, is approved by the authorities to maintain EDEMSA's economic and financial sustainability.

The results of HASA continue to benefit from the change in the regulations that allows HASA to sell all the electricity it generates to the wholesale market with revenue increasing 31% over 2009.

The Group holds licences in prolific oil and gas provinces in Argentina all of which we believe have the potential for significant discoveries and reserves. During the year the Group concluded a farm-in agreement with YPF S.A. ("YPF") for its two licence blocks Corralera and Mata Mora in the province of Neuquen in Argentina. The Group now holds a 13.5% carried interest in these blocks, subject to completion of the agreement.

After the year-end, the Group acquired a 24% working interest and exercised its option to acquire a further 10% working interest in Vega Grande a producing field located in the province of Mendoza in Argentina and secured an option to acquire the remaining 66% working interest and a 100% working interest in two further development blocks, La Paloma and Cerro Alquitran. Furthermore, after the year-end, the Group completed the acquisition of its joint venture partner's interest in three exploration licences covering six blocks in the province of Chubut and one block in the province of Rio Negro in Argentina.

The completion of these transactions means the Group is now an oil producer and owner of proven reserves which should now enable us to accelerate exploration activity on these blocks. The Group's prime focus for the balance of this year and 2012 will be the development of our oil and gas interests.

Neil Bleasdale

Chairman

CHIEF EXECUTIVE'S REVIEW

Introduction

2010 has been a successful year for the Group, particularly for our electricity operating companies. Whilst we were not able, during the year, to accelerate the exploration program in the oil and gas sector as quickly as we would have liked, the completion of a farm-in agreement with YPF and the acquisition of various other interests after the year-end places us in a strong position to accelerate activity on our oil and gas interests.

The highlights for 2010 are:

·; Increase in EDEMSA's EBITDA for the year ended 31 December 2010 to AR$118 million (US$30 million) from AR$68 million (US$18 million) in the previous year

·; Full impact of adjustment in electricity tariffs for the third review period charged by EDEMSA by on average 12% on 1 August 2009 and 12% on 1 December 2009

·; Acquisition of rights in EDEMSA bonds with a face value of US$85.1 million

·; Farm-in agreement with YPF for two blocks in the province of Neuquen

·; Continuation of geophysical studies and seismic reprocessing

·; Listing of the Company's shares on Buenos Aires Stock Exchange

·; Acquisition of joint venture partner's interest in seven licence blocks after the year end

·; Acquisition of 24% interest in producing field with reserves after the year end

We believe 2011 will be an exciting year for Andes in general and particularly for our oil and gas assets given the recent transactions that have been concluded. We will focus on the development of these licences, which will provide our shareholders with a broader base of risk between pure exploration and production.

Oil and Gas Interests

Corralera and Mata Mora Blocks

Andes successfully concluded a farm-in agreement with YPF for the Corralera and Mata Mora blocks in the province of Neuquen. YPF is Argentina's largest oil company and is controlled by Repsol YPF, S.A. ("Repsol"), Spain's largest oil and gas company. Repsol has operations in Europe, Latin America, North America, the Middle East, Asia and North Africa and explores for and produces oil and natural gas, refines petroleum and transports petroleum products and liquefied petroleum gas. At the end of 2009 YPF had estimated aggregate proven reserves of 1,013 million barrels of oil equivalent according to its filings with the NYSE.

This agreement is subject to the province approving a 1 year extension to the exploration period and the formalisation of new Union Transitoria de Empresas. Andes previously held a 20% working interest in the blocks and will now hold a 13.5% carried interest following completion. Under the agreement, YPF will fund exploration work program commitments up to the stage of commercial discovery. We believe our association with YPF will bring huge benefits to our oil and gas operations and we hope to be able to develop our relationship with them on other licensed areas.

These two licenses are well located in terms of current gas production, within the largest gas producing basin in Argentina. The Vaca Muerta source rock, present in these licenses, could eventually be found to be holding unconventional reserves.

Confluencia, San Bernardo, Pampa Salamanca Norte, Buen Pasto, Sierra Cuadrada, Rio Senguerr and Laguna El Loro Blocks 

The results of the Airborne survey undertaken by Carson Helicopters, Inc combined with the Soil Gas geochemical survey, performed by Exploration Technologies, Inc, and the existing well information, confirmed the presence of active petroleum systems in Confluencia, San Bernardo and Buen Pasto blocks. Wells El Bloque 1, Kil.ch.EB.x-1001and Meseta del Humo x1 all showed presence of hydrocarbons that require further studies. A new work programme is being formulated to deepen the knowledge of these blocks and their commercial potential.

Furthermore, after the year-end, Andes completed the acquisition of its joint venture partner's interest in the consortium agreement that holds the licences for these blocks. As a result of this transaction Andes now has a 98 per cent. economic interest over these licences, after a 2% royalty due to the operator. Andes is in advance negotiations with one of the major oil companies in Argentina for a farm-in agreement for these blocks.

Vega Grande, La Paloma and Cerro Alquitran

After the year end Andes completed the acquisition of a 34% working interest in Vega Grande with the option to acquire the remaining 66% of Vega Grande and 100% working interest in two further blocks, La Paloma and Cerro Alquitran. Vega Grande is a producing asset located in the Mendoza province, with total 1P/2P reserves of 4.3 MM Boe, accumulated total production of 1.6 MM Boe and daily production of 150 bpd. Approximately 172km of 2D seismic has been shot over the licence, which Andes consider to be under explored. A reserves report was produced by Oilfield Production Consultants (OPC) Ltd for Andes, which shows for this asset:

Vega Grande Reserves

Vega Grande Contingent Resources

Andes has also taken operational and management control of the block for which it will be compensated with a management fee of 5% of total production. We believe Vega Grande to be an under-exploited and under-managed field with high potential.

Other interests

The Group has also maintained its interest in certain non-Argentine assets. These are primarily investments in early stage gas and mineral exploration assets located in North America, Europe and Mauritania.

Electricity Distribution and Power Generation

EDEMSA

During 2010, we consolidated the productivity and process efficiency gains made in 2009. Special emphasis has been placed on increasing productivity and the efficiency of processes with a particular focus on staff specific training to improve customer service. We were able to further reduce business process times involving; contract renegotiations; invoice distribution; meter readings; and the management of bad debt.

Losses Evolution

As of December 2010, EDEMSA reached an historical minimum record for energy losses of 10.8%. Again, this has been the result of a co-ordinated effort between inspection activities, irregular situations detections, recovery of clients and a model of tracking anomalies and the consumption of our customers.

Evolution of Energy Demand

Energy consumption of Argentina in 2010 increased by 5.9% over 2009, whilst the volume of energy sold by EDEMSA during 2010 in our concession area in Mendoza was 3,221 GWh, representing a growth of 6.7% over 2009.

Cost of supply

During 2010 there was an increase in the average price of energy supplied of 1.5% due to seasonal price increases. The pass through of these increases to customers recovers these cost increases.

Results

EDEMSA recorded a profit of AR$35million in 2010 and EBITDA of AR$118 million. This represents significant progress from the profit of AR$9 million and EBITDA of AR$68 million in 2009. Sales for the year were AR$647 million, a 28.6% increase on 2009 revenues of AR$503 million. This positive effect is explained by a number of factors; the tariff adjustments; strong growth in physical energy demand of 6.7%; and the pass through of the cost of energy purchased. Gross profit increased to AR$205 million, an increment of AR$84 million (69.4%) over 2009 gross profit of AR$121 million. Operating profit improved to AR$90 million compared to AR$40 million in 2009, an increase of AR$50 million or 125%.

During the year. EDEMSA and the investment trust established by EDEMSA, entered into agreements to acquire the rights over approximately 92% of EDEMSA bonds in issue. At the end of the contractual period, EDEMSA and the trust will own 88.06% of the Class A notes, 100% of the Class B notes, 98.93% of the Class D notes and 98.93% of the Class D certificates. These assets are stated net against borrowings in the balance sheet and a surplus of AR$21 million resulting from the net present value impact of the reduction in the borrowings has been recognised in the income statement under finance costs. The present value of borrowings has fallen from AR$260 million at the end of 2009 to AR$138 million at the end of 2010.

On 30 June 2010 EDEMSA signed an advisory services agreement with MSO Andes Energia Argentina S.A., a wholly owned subsidiary of Andes Energia Plc, for the provision of advisory services. During the year EDEMSA was charged AR$11 million for these services.

Equity and financial structure

The above financial debt restructuring has significantly improved the capital structure of EDEMSA. At the end of 2010 EDEMSA had a solvency ratio (net assets/liabilities) of 1.43 compared to 1.01 at the end of 2009. EDEMSA continues to meet its commitments under the Concession Agreement and has met and continues to meet all financial covenants and other commitments under the terms of the EDEMSA bond agreement.

HASA

The company recorded a profit for the year of AR$6.7 million, an improvement of 109% compared to the 2009 profit of AR$3.2 million. Sales increased to AR$21 million from AR$16 million in 2009, an increment of 31%. Inflows from rainfalls were lower than the historical average resulting in 1,160.68Hm³ accumulating in the reservoir. The power generated in the year was 179GWh, 20% higher than 2009. HASA is also considering participation in a 40MW wind-farm to take advantage of existing transportation lines.

Luis Alvarez Poli

Chief Executive Officer

GROUP INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 DECEMBER 2010

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

1. GENERAL INFORMATION

1.1 Introduction

The financial information set out in this announcement does not comprise the Group's statutory accounts for the years ended 31 December 2010 or 31 December 2009.

The financial information has been extracted from the statutory accounts of the Company for the years ended 31 December 2010 and 31 December 2009. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

The Company has produced its statutory accounts for the year ended 31 December 2010 in accordance with International Financial Reporting Standards as adopted by the European Union and in accordance with the Group's accounting policies as set out in the 2009 statutory accounts.

The statutory accounts for the year ended 31 December 2009 have been delivered to the Registrar of Companies, whereas those for the year ended 31 December 2010 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

1.2 Business and geographical segments

1.3 Finance income

1.4 Finance costs

1.5 Taxation

The tax rate used for the 2010 and 2009 reconciliations above is the corporate tax rate of 35% payable by corporate entities in Argentina on taxable profits under tax law in that jurisdiction.

1.6 Earnings/(loss) per share

Earnings/(loss) per share is presented on two bases: basic earnings/(loss) per share and diluted earnings/(loss) per share. Basic earnings/(loss) per share is in respect of all activities and diluted earnings/(loss) per share takes into account the dilution effects which would arise on conversion or vesting of warrants in issue.

The warrants are deemed to be non-dilutive for the purposes of this calculation as the exercise price was more than the market price at the year-end.

1.7 Financial liabilities

Bonds

Bond terms

The bonds represent the amounts owed to EDEMSA's bond. The discount rate used to determine the present value reflected market assessments of the time value of money and the increases specific to the liability. EDEMSA discounted the probable cash flows of the new debt applying a 10.2% annual rate in US$.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

As at 31 December 2010 the following EDEMSA debt securities were in issue:

(i) Class A simple, non-convertible notes with a face value of US$1.00 each, due in 2018, for a total amount of US$58,650,000.

(ii) Class B simple, non-convertible notes with a face value of US$1.00 each, due in 2018, for a total amount of US$17,814,969.

(iii) Class D simple, non-convertible notes with a face value of US$1.00 each, due in 2018, for a total amount of US$14,544,706 and US$14,544,706 Class D Certificates, due in 2027.

The basic terms of the securities are as follows:

(i) The notes are direct, unconditional and general obligations of EDEMSA and will be treated, at all times, pari passu with other outstanding present or future non-priority, general obligation notes of EDEMSA, except for notes with priorities according to effective legal regulations. The company may redeem the notes at any time in certain cases.

(ii) The notes provide for the payment of principal on arrears in quarterly installments on 31 March, 30 June, 30 September and 31 December, each year, beginning on 31 March 2007. The annual principal amortisation schedule steps up.

(iii) The notes establish that interest will be paid quarterly in arrears on the principal payment dates. The first interest payment date was 31 March 2007.

(iv) The class A and class B notes provide that interest will accrue on the outstanding principal as from the date of issue at a step-up annual fixed rate established in accordance with the following: a 1% interest rate during the first two years as from the date of issue, a 2% interest rate in the third and fourth years and a 4% interest rate as from that year (i.e. from the fifth year onwards).

(v) The class D notes provide that interest will accrue on outstanding principal as from 1 January 2009 at a step-up annual fixed rate established in accordance with the following: no interest will accrue during the first two years as from the date of issue, a 1% interest rate in the third and fourth years and a 3% interest rate as from the fifth year.

(vi) The class D notes include an additional payment with excess cash flows semi-annually from 30 April 2008 to 31 October 2027. This right is represented in the Class D certificates.

Under the agreement with bondholders, EDEMSA must comply with certain covenants including:

(i) Debt/EBITDA ratios

(ii) Capital expenditures restrictions

(iii) Working capital restrictions

The terms and conditions of the notes also include standard commitments for these transactions related to the following:

·; Restrictions on liens

·; Restrictions on new indebtedness

·; Restrictions on transactions with shareholders and related companies

·; Restrictions on restricted payments

·; Delivery of financial statements

·; Restrictions on mergers and consolidations

As of the end of this period, all the above commitments have been fulfilled.

Acquisition by EDEMSA

In June 2010 EDEMSA entered into a contract for the Assignment of Rights with Magnus International S.A., whereby it fully and irrevocably acquired the rights over 88.06% of the Class A notes issued by EDEMSA. In consideration for the assignment, EDEMSA paid Magnus International S.A. the sums of US$13,048,556 and AR$21,600,000, with the latter sum payable in twelve equal and consecutive monthly instalments of AR$1,800,000.

Acquisition by EDEMSA Investment Trust

In November 2008 EDEMSA set up a Trust, under which EDEMSA is the trustor, beneficiary and ultimate beneficiary.

In June 2010, EDEMSA was notified by the Trust that it had entered into a contract for the Assignment of Rights with Magnus International S.A. whereby it fully and irrevocably acquired the rights over 96.07% of the Class B notes issued by EDEMSA and over 98.93% of the Class D notes issued by EDEMSA. In consideration for the assignment, the Trust paid Magnus International S.A. the sum of US$11,930,980.

It should be noted that the Trust already held Class B notes issued by EDEMSA with a face value of US$700,000 (3.93% of the Class B notes in issue) and 16,367,734 Class D certificates issued by EDEMSA (98.93% of the certificates in issue).

Considering that almost all the trust assets, as detailed in the foregoing paragraphs, correspond to securities issued by EDEMSA or EDEMSA's right to hold them in the future, in these financial statements EDEMSA has been considered the beneficiary and holder of all the assets the Trust.

Acquired rights and obligations

The above rights acquired by EDEMSA and the Trust include the rights, obligations and responsibilities attached to and related to the Total Return Swap ("TRS") entered into between Deutsche Bank AG and the Company on 27 May 2010 for a term of 3 years which, prior to the transfer to EDEMSA and the Trust, had been acquired by Magnus International S.A.

Under the TRS, US$24,359,020 of finance was provided, which under the conditions of the TRS is due for repayment within three years and carries an annual interest rate of 15%. The payment of this sum is funded from the normal payment flows generated from the EDEMSA bonds with a potential surplus or deficit being determined at the end of the TRS term (through normal or early termination, as set forth in the contract) as a result of comparing the payment flows from the EDEMSA bonds with the financed amount including accruing interest. As collateral the Company has pledged 80% of its indirect interest in Andes Energia Argentina S.A and through its intermediary companies a first security interest in 85% of SODEM S.A. and a second security interest in 15% of SODEM S.A., which holds the Group's 51% interest in EDEMSA. For the amounts paid and payable, and as a result of the assignment, EDEMSA and the Trust shall receive at the date of termination of the TRS; Class A notes with a face value of US$51,650,000 (88.06% of Class A notes in issue); Class B notes with a face value of US$17,114,969 (96.07% of Class B notes in issue); and Class D notes with a face value of US$16,367,734 (98.93% of the Class D notes in issue).

Accounting treatment

As described above, considering the transaction as a whole and the structure of the interests acquired by EDEMSA, whether directly or through its participation in the Trust, EDEMSA has recognized the effects of this transaction by calculating the net present value of the joint obligations arising under the contracts and the existing bond obligations. Although the bond obligations will remain in force until termination of the TRS, the rights acquired by EDEMSA give EDEMSA the benefit of receiving the notes, the subject of the TRS, upon termination of the TRS and EDEMSA and the Trust will hold, together with the bonds already held by the Trust, 88.06% of the Class A notes, 100.00% of the Class B notes, 98.93% of the Class D note and 98.93% of the Class D certificates. The bond liabilities have been shown net of these assets.

A surplus of AR$21 million (US$5.4 million) resulting from the net present value impact of the reduction in the borrowings has been recognised in the income statement under finance costs.

Other borrowings - Current

During 2002, as a result of the economic crisis in Argentina, HDS restructured its debt. All creditors apart from one agreed to the restructure. HDS and this creditor are renegotiating the final amount and payment schedule and HDS has recorded the debt as of 31 December 2010 in other borrowings, at management's best estimate of the debt fair value.

Other borrowings - Non-current

At the year end the Company had a US$5,000,000 senior secured loan facility repayable within 4 years. This debt carries a quarterly coupon at an interest rate of 12.75% per annum, with the principal due for repayment by March 2013. In addition the Company had a US$7,191,820 unsecured loan facility repayable within 4 years. This debt carries a quarterly coupon at an interest rate of 12.50% per annum, with the principal due for repayment by May 2013.

The payment of interest for the period from 15 November 2009 to 14 February 2010 was satisfied by the issue of 580,706 ordinary shares at 28 pence on 16 February 2010; the payment of interest for the period from 15 February 2010 to 14 May 2010 was satisfied by the issue of 723,408 ordinary shares at 20 pence on 1 July 2010; the payment of interest for the period from 15 May 2010 to 14 August 2010 was satisfied by the issue of 688,741 ordinary shares at 20 pence on 28 September 2010; and the payment of interest for the period from 15 August 2010 to 14 November 2010 was satisfied by the issue of 683,595 ordinary shares at 20 pence on 24 November 2010 . The lender has the option to convert the loan, in whole or part, into ordinary shares of the Company on 30 days notice at a price equal to the average price of the ordinary shares of the Company for the previous 90 days, subject to the terms of the loan agreement.

Bank borrowings

At the year end bank borrowings of AR$23,963,881 were outstanding repayable within 12 months. Of the amount outstanding; AR$9,000,000 carries interest at a rate of 14% per annum; AR$2,339,163 carries interest at a rate of 18.5% per annum; and AR$12,624,718 carries interest at a rate of 13.5% per annum. In addition, at the year end, AR$1,914,362 had been drawn down on an overdraft facility repayable within 12 months and carrying interest at a rate of 16.5% per annum. The loans are unsecured.

1.8 Contingencies

(a) Contingent assets

On 3 July 2006, EDEMSA was notified by the Argentine fiscal bureau of the disallowance of a portion of value added tax credits used in prior years. The assessment is based on an objection by that authority that the credits used by EDEMSA derived from drawbacks on exports acquired from third parties.

On 7 August 2006, an appeal was lodged before the General Director of the Argentine fiscal bureau against the administrative resolutions that disallowed the above-mentioned credits.

At the date of these financial statements, the Group has paid to the tax authority as a result of that claim AR$2,667,163. The Group has received from the tax bureau a demand to pay interest of AR$2,734,301 on the amount claimed, which the Group has made a provision for. An appeal has been lodged to avoid payment of the interest.

In the opinion of EDEMSA's tax advisors, the criterion used by the Argentine fiscal bureau is not in line with tax regulations. The directors of EDEMSA believe it will recover this amount from the Argentine fiscal bureau and have taken the necessary steps to enforce its rights in the face of the Tax Authority's claim. Notwithstanding, EDEMSA has accrued the interest requested by the fiscal authority.

(b) Contingent liabilities

The Company has received a claim from the Argentine fiscal bureau in respect of a different interpretation of tax assessed in certain years. On 25 June 2007 the Company received notice from the authorities of its intention to pursue the claim plus interest and penalties. In the opinion of EDEMSA's tax advisors, the criterion used by the Argentine fiscal bureau is not in line with tax regulation. For this reason the Company has not made a provision for this claim. On 19 July 2007 EDEMSA filed appeals with the National Tax Court. The Group does not believe an estimate of its financial effect is practicable and could be misleading.