Total Return Swap

14 June 2010

Andes Energia plc

("Andes" or the "Company")

Total Return Swap

Foreign exchange exposure mitigation

The Board of Andes (AIM: AEN; BCBA: AEN), the Latin American energy group, is pleased to announce the completion of a Total Return Swap Agreement ("TRS") with Deutsche Bank AG ("Deutsche") and a TRS Participation Agreement ("TRSPA") with Magnus International S.A. ("Magnus"), a Chilean financial institution.

In accordance with the terms of the TRS, Deutsche will acquire EDEMSA bonds ("Bonds") with a face value of US$76.8 million for a price of US$34.8 million, representing approximately 92% of Bonds currently in issue. Deutsche has funded US$24.4 million ("Funded Amount") of the purchase price and Andes has funded the balance of US$10.4 million under the TRSPA. All quarterly interest and principal received in respect of the Bonds will be received by Deutsche and set off against a quarterly coupon due by Andes to Deutsche of 15% per annum on the Funded Amount. If after such set off an amount still remains payable by Deutsche to Andes, such amount will be applied in the reduction of the Funded Amount. The TRS has a 3 year term and includes an early termination option provision beginning seven months after the effective date of the TRS.

Under the TRSPA, Magnus shall participate in the benefits and proceeds arising from the TRS. As consideration, Magnus has assumed Andes's obligations under the TRS to finance the balance of the purchase price plus accrued interest, the TRS structuring fee and the balance of any Funded Amount due at the end of the TRS term. Magnus will also provide to Andes, with effect from 30 June 2013, foreign currency exchange risk protection for Bonds with a face value up to US$30 million, in the event the Argentine Peso suffers a devaluation against the US Dollar in excess of 25% in any six month period. In such an event, EDEMSA shall have the right to postpone, extend and/or reschedule payments due under the Bonds with any rescheduled amount accruing interest at 8% per annum. In addition Magnus will pay Andes a fee of US$2.5 million over the life of the TRS and reimburse Andes for all costs and expenses arising from the TRS.

As first collateral, Deutsche will hold the Bonds for their account until termination of the TRS. As second collateral Andes has pledged 80% of its indirect interest in Andes Energía Argentina S.A and through its intermediate holding 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 51% direct interest in EDEMSA

Nigel Duxbury, Finance Director of Andes, commented, "We have managed to structure a transaction that we believe will facilitate the reduction and refinancing of the current indebtedness of our subsidiary EDEMSA and reduce our foreign currency exchange rate risk whilst, at the same time, providing Andes with a direct financial benefit of approximately US$2.5 million from the transaction "

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Note to Editors:

Andes is a Latin American energy group, with electricity distribution, hydro-electric power and oil and gas interests in Argentina. The Company's focus is on the Argentinean energy sector, which it believes offers premium assets at undervalued prices. Andes has a 51% interest in EDEMSA.