In 1991, as part of the economic plan adopted by the Executive Branch, the Argentine government undertook an extensive privatization program of all major state-owned industries, including within the electricity generation, transmission and distribution sectors.  The ultimate objective of the privatization process was to improve quality of service.  The privatization process commenced in February 1992 with the sale of several large thermal generation facilities formerly operated by SEGBA, and continued with the sale of transmission and distribution facilities (including those currently operated by our company) and additional thermoelectric and hydroelectric generation facilities.  At the end of 2001 and beginning of 2002, Argentina experienced the worst political, economic and social crisis of the last 50 years which also severely affected the electricity sector.  This situation caused many Argentine electricity generators, transmission companies and distributors to defer making further investments in their networks. 
To address this situation, since 2002 the Argentine government established various measures in the wholesale electricity market, including the establishment of caps on the prices paid by distributors for electricity power purchases and the requirement that all prices charged by generators be calculated based on the price of natural gas (which are also regulated by the Argentine government), regardless of the fuel actually used in generation activities, which together have created a huge structural deficit in the operation of the wholesale electricity market. 
In December 2004, the Argentine government adopted new rules to readapt or readjust the marketplace.  To this end, during 2008 two new generation plants, San Martin and Belgrano, will emerge with a capacity of 1,600 MW.  In addition, the Yacyreta elevation level and the Atucha II nuclear power plant will be installed.  Furthermore, various private projects are planned in terms of equipment, which will enable the supply of future demand growth. 
The planned construction of these new generators reflects a recent trend by the Argentine government to take a more active role in promoting energy investments in Argentina.  In addition to these projects, in April 2006 the Argentine congress enacted a law that authorized the Executive Branch to create a special fund to finance infrastructure improvements in the Argentine energy sector through the expansion of generation, distribution and transmission infrastructure relating to natural gas, propane and electricity.
Finally, in September 2006 the Secretary of Energy (Secretaría de Energía) as per the Ministry of Federal Planning, Public Investment and Services issued Resolution No. 1281/06 (“Energy Plus Program”) in an effort to respond to the sustained increase in energy demand following Argentina’s economic recovery after the crisis.  Through this resolution, companies that will consume more energy than in 2005 will pay a price equivalent to the cost of generation plus a profit to the generator which must be approved by the aforementioned Ministry.  The goal of this resolution is to foster new private, interested parties to invest fresh capital into the energy sector in order to generate new energy sources.
Lastly, in January of 2007, the Executive Branch ratified a tariff increase for industrial and commercial clients of the two largest electrical energy distribution companies of the country, Edenor and Edesur, thereby making official the agreements signed between both companies and the national state in 2005.
This 28% increase in the aggregate value of distribution, retroactive to November 2005, was in addition to the tariff increases to sectors and industries that had already been taking place at various distributors in the country since the devaluation up until now.  These agreements reached with Edenor and Edesur signify a continuation of previous steps reached in the concession renegotiation process with the federal government, which in the case of the electricity distribution sector at the national level had been underway since 2005 through the predecessor company, Edelap.
These agreements will be applied transitorily until the Integral Tariff Revision, or RTI, is completed by the federal government, which is expected in 2008, and through which new tariff increases are anticipated that will achieve a reasonable return of capital as stated in the Concession Contract and RTI.