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NON-FINANCIAL ASSETS AND LIABILITIES
 12 Months Ended
Dec. 31, 2022
Non-financial Assets And Liabilities  
NON-FINANCIAL ASSETS AND LIABILITIES

NOTE 11: NON-FINANCIAL ASSETS AND LIABILITIES

11.1Property, plant and equipment

 

                             
      Original values
Type of good     At the beginning    Increases (1)   Increases for
incorporation (2)		   Transfers   Decreases   Impairment    
                At the end 
                 
Lands     14   -   -   -   -   -   14
Buildings     140   -   3   -   -   -   143
Equipment and machinery     1,458   5   291   163   (1)   -   1,916
Wells     867   9   -   145   (1)   (28)   992
Mining property     253   -   -   -   -   (72)   181
Vehicles     8   2   -   -   -   -   10
Furniture and fixtures and software equipment     55   2   -   2   -   -   59
Communication equipments     3   -   -   -   -   -   3
Materials, spare parts and tools     30   43   -   (37)   -   -   36
Petrochemical industrial complex     23   -   -   6   -   -   29
Work in progress     135   352   -   (233)   -   -   254
Advances to suppliers     52   37   -   (46)   -   -   43
Other goods     2   -   1   -   -   -   3
Total at 12.31.2022     3,040   450   295   -   (2)   (100)   3,683
Total at 12.31.2021     2,792   253   -   -   (5)   -   3,040

 

 

(1)Includes US$ 11 million corresponding to capitalized financial costs in the fiscal year ended December 31, 2022. There are no capitalized financial costs in the fiscal year ended December 31, 2021.
(2)See Notes 5.1.3 and 5.1.5.

 

      Depreciation   Net book values
Type of good     At the beginning    Decreases    For the year   Impairment   At the end   At 12.31.2022   At 12.31.2021
               
               
Lands     -   -   -   -   -   14   14
Buildings     (68)   -   (8)   -   (76)   67   72
Equipment and machinery     (536)   -   (103)   -   (639)   1,277   922
Wells     (532)   -   (77)   20   (589)   403   335
Mining property     (174)   -   (10)   50   (134)   47   79
Vehicles     (7)   -   (1)   -   (8)   2   1
Furniture and fixtures and software equipment     (48)   -   (4)   -   (52)   7   7
Communication equipments     (1)   -   -   -   (1)   2   2
Materials, spare parts and tools     (3)   -   -   -   (3)   33   27
Petrochemical industrial complex     (12)   -   (5)   -   (17)   12   11
Work in progress     -   -   -   -   -   254   135
Advances to suppliers     -   -   -   -   -   43   52
Other goods     -   -   -   -   -   3   2
Total at 12.31.2022     (1,381)   -   (208)   70   (1,519)   2,164    
Total at 12.31.2021     (1,182)   -   (199)   -   (1,381)       1,659

 

 

11.1.1 Impairment of Property, plant and equipment

The Company regularly monitors the existence of events or changes in circumstances which may indicate that the book value of property, plant and equipment may not be recoverable in accordance with the policy described in Notes 4.9 and 6.1.1.

In the Power Generation segment, in May 2021 spot market prices were modified by SE Resolution No. 440/21, which, although providing for a 29% increase in remuneration, permanently abrogated the application of the automatic adjustment mechanism, with an impact on the expected revenues update schedule (see Note 2.1). It is worth highlighting that the most significant share of revenues in the Power Generation segment comes from energy remunerated under a differential scheme (that is, supply agreements with large users in the MATER, Energy Plus or supply agreements entered into with CAMMESA), which have not been affected by the previously mentioned regulation.

In view of the above-mentioned indications, the Company determined the recoverable value of the CGUs that make up the Power Generation segment as of June 30, 2021. As of December 31, 2021 and 2022, the Company did not identify additional indications that could impact the assumptions considered in the aforementioned assessments.

As of June 30, 2022, due to Company’s strategic reasons and aiming to focus its investments in the development and exploitation of its unconventional gas reserves, and also in line with the Rincón del Mangrullo block’s Joint Venture members’ strategy, future drilling and workover activities were rescheduled for the next few years, which involves a 2.7 MMBoe recategorization of reserves to contingent resources.

In view of the above-mentioned indications of impairment, the Company has determined the recoverable amount of the CGU Rincón del Mangrullo making up the Oil & Gas segment as of June 30, 2022. As of December 31, 2022, the Company did not identify additional indications that could impact the assumptions considered in the aforementioned assessment.

The methodology used in the estimation of the recoverable amount consisted on calculating each CGU value in use on the present value of future net cash flows expected to be generated by the CGU, discounted with a rate reflecting the weighted average costs of the invested capital.

Cash flows were prepared based on estimates on the future behavior of certain variables that are sensitive in the determination of the value in use, including the following: (i) reference prices for products; (ii) demand projections per type of product; (iii) costs evolution; and; (iv) macroeconomic variables such as inflation and exchange rates, etc.

11.1.1.1 Generation segment

As of June 30, 2021, the value of the assets in the Power Generation segment does not exceed its recoverable amount, therefore, the Company has not recorded any impairment losses.

The projections used in the calculation of the recoverable amount of the CGUs of the Power Generation segment take into consideration 2 scenarios that weigh: i) the annual price update, ranging between 80% and 100% compared to the annual inflation; ii) the regularization of the financing term granted to CAMMESA in 2022/2023 and iii) a 10.3% WACC rate after taxes.

11.1.1.2 Oil & Gas segment

As of June 30, 2022, the recoverability assessment of the Rincón del Mangrullo CGU in the Oil and Gas segment has resulted in the recognition of impairment losses for US$ 30 million.

The key assumptions used to calculate the recoverable amount considered: i) the reprogramming of drilling and workover activities and ii) a 12.4% after-tax WACC rate.

Finally, it is important to highlight that as of December 31, 2022 and 2021, the book value of the Oil and gas segment assets, including the goodwill assigned to the segment, does not exceed its recoverable value.

 

11.2Intangible assets

 

                         
    Original values
Type of good   At the beginning     Increases   Increases for
incorporation (1)		   Decreases   Impairment (2)   At the end
             
             
Concession agreements   2     -   -   -   -   2
Goodwill   35     -   -   -   -   35
Intangible identified in acquisitions of companies   7     -   94   -   -   101
Digital assets   -     31   -   (18)   (6)   7
Total at 12.31.2022   44     31   94   (18)   (6)   145
Total at 12.31.2021   62     4       (4)   (18)   44
                           
                           
    Amortization        
Type of good   At the beginning     For the year   Impairment (2)   At the end        
               
               
Concession agreements   (2)     -   -   (2)        
Intangible identified in acquisitions of companies   (4)     (1)   -   (5)        
Total at 12.31.2022   (6)     (1)   -   (7)        
Total at 12.31.2021   (21)     (1)   16   (6)        
                           
                           
    Net book values                
Type of good   At 12.31.2022     At 12.31.2021                
                       
Goodwill   35     35                
Intangible identified in acquisitions of companies   96     3                
Digital assets   7                      
Total at 12.31.2022   138                      
Total at 12.31.2021         38                

 

(1)See Notes 5.1.3 and 5.1.5.
(2)As of December 31, 2022, digital assets recoverability was affected by their closing market value, resulted in the recognition of impairment losses for US$ 6 million. Considering the assumptions detailed in Note 11.1, the assessment of recoverability for the Power Generation segment, resulted in the recognition of impairment losses for the Diamante hydroelectric power plant in an amount of US$ 2 million in 2021.

 

11.3Deferred tax assets and liabilities

The composition of the deferred tax assets and liabilities is as follows:

 

             
  12.31.2021   Profit (loss)   Increases for incorporation (1)   12.31.2022
Tax loss carryforwards 13   6   -   19
Property, plant and equipment 80   71   -   151
Financial assets at fair value through profit and loss 3   (3)   -   -
Trade and other receivables 5   (1)   -   4
Provisions 57   2   -   59
Salaries and social security payable  -   1   -   1
Defined benefit plans 9   (1)   -   8
Other -   1   -   1
Deferred tax asset 167   76   -   243
Property, plant and equipment -   -   (79)   (79)
Intangible assets (13)   -   (22)   (35)
Investments in companies (11)   3   -   (8)
Inventories (10)   (9)   -   (19)
Financial assets at fair value through profit and loss (14)   (1)   -   (15)
Trade and other receivables (31)   8   -   (23)
Taxes payables (3)   1   -   (2)
Tax inflation adjustment (1)   (124)   (13)   (138)
Deferred tax liability (83)   (122)   (114)   (319)
Deferred tax (liability) asset 84   (46)   (114)   (76)

 

 

(1)

See Notes 5.1.3 and 5.1.5.

 

 

 

  12.31.2020   Profit (loss) (1)   12.31.2021
Tax loss carryforwards 126   (113)   13
Property, plant and equipment -   80   80
Intangible assets 3   (3)   -
Financial assets at fair value through profit and loss -   3   3
Trade and other receivables 6   (1)   5
Provisions 28   29   57
Salaries and social security payable  3   (3)   -
Defined benefit plans 5   4   9
Trade and other payables 3   (3)   -
Tax inflation adjustment 4   (4)   -
Deferred tax asset 178   (11)   167
Property, plant and equipment (13)   13   -
Intangible assets (11)   (2)   (13)
Investments in companies (25)   14   (11)
Inventories (6)   (4)   (10)
Financial assets at fair value through profit and loss (4)   (10)   (14)
Trade and other receivables (7)   (24)   (31)
Taxes payables (3)   -   (3)
Tax inflation adjustment (2)   1   (1)
Deferred tax liability (71)   (12)   (83)
Deferred tax asset (liability) 107   (23)   84

 

(1)Includes US$ 13 million corresponding to discontinued operations.

Deferred tax assets and liabilities are offset in the following cases: a) when there is a legally enforceable right to offset tax assets and liabilities; and b) when deferred income tax charges are associated with the same fiscal authority. The following table shows the figures disclosed on the Consolidated Statement of Financial Position, which for its determination, were adequately compensated:

 

     
  12.31.2022   12.31.2021
Deferred tax asset 36   84
Deferred tax liability (112)   -
Deferred tax (liability) asset (76)   84

 

11.4Inventories

 

       
  12.31.2022   12.31.2021
Current        
Materials and spare parts   104   87
Advances to suppliers   8   8
In process and finished products   61   60
Total (1)   173   155

 

 

(1)It includes impairment loss as a result of the performed recoverability assessment for US$ 2 million as of December 31, 2022 and 2021, acoording with the policy described in Note 4.13.

 

11.5Provisions

 

       
    12.31.2022   12.31.2021
Non-Current        
Contingencies   107   106
Asset retirement obligation and wind turbines decommisioning   25   19
Environmental remediation   15   15
Other provisions   -   1
Total Non-Current   147   141
         
Current        
Asset retirement obligation and wind turbines decommisioning   2   2
Environmental remediation   2   3
Total Current   4   5

 

The evolution of the provisions is set out below:

 

           
    12.31.2022
    Contingencies   Asset retirement obligation and decommisioning  of wind turbines   Environmental remediation
             
At the beginning of the year   106   21   18
Increases   5   6   -
Increases for incorporation (1)   -   1   -
Decreases   (1)   -   (1)
Gain on monetary position, net   (2)   -   -
Reversal of unused amounts   (1)   (1)   -
At the end of the year   107   27   17

 

 

(1) See Note 5.1.3.

 

    12.31.2021
    Contingencies   Asset retirement obligation and decommisioning  of wind turbines   Environmental remediation
             
At the beginning of the year   103   21   3
Increases   16   3   15
Decreases   -   (1)   -
Reversal of unused amounts (1)   (13)   (2)   -
At the end of the year   106   21   18

(1) Includes recovery of US$ 12.5 million related to waive the timely granted dispatch of Las Armas Wind Farm (see Note 2.1.2.3).

 

    12.31.2020
    Contingencies   Asset retirement obligation and decommisioning  of wind turbines   Environmental remediation
             
At the beginning of the year   139   22   3
Increases   21   2   -
Decreases   (1)   -   -
Gain on monetary position, net   (15)   -   -
Reversal of unused amounts   (8)   (3)   -
Reclassified to liabilities associated to assets classified as held for sale   (33)   -   -
At the end of the year   103   21   3

 

11.5.1Provision for Environmental remediation

The Company is subject to extensive environmental regulations in Argentina. The Company’s management believes that its current operations are in compliance with applicable environmental requirements, as currently interpreted and enforced, including regulatory remediation commitments assumed. The Company undertakes environmental impact studies for new projects and investments and, to date, environmental requirements and restrictions imposed on these new projects have not had any material adverse impact on Pampa’s business.

In particular, the Province of La Pampa has submitted a claim to the Company regarding the abandonment of certain wells and the execution of certain tasks associated with the relinquishment of the Jagüel de los Machos and Medanito blocks, which took place in 2015 and 2016, respectively. The Company has challenged the different administrative acts passed by the provincial authorities (including a governor’s executive order) and is addressing claims for the Jagüel de los Machos block in the judicial jurisdiction. Even though the province answered the complaint in the month of March 2021, the Company has started formal negotiations to resolve the dispute, agreeing on the suspension of procedural time limits. During 2021, regarding these claims and based on the progress of the ongoing negotiations, the Company recorded provisions for the estimate of remediation work costs to be incurred in these blocks.

The Company has performed a sensitivity analysis relating to the discount rate. The 1% increase or decrease in the discount rate would not have a significant impact on the Company’s results of operations.

11.5.2Asset retirement obligations and wind turbines decommissioning

Pursuant to the regulations in force in Argentina, where it develops its oil and gas exploration and production operations, the Company is under an obligation to incur costs associated with the plugging and abandonment of wells. Furthermore, pursuant to the associated usufruct agreements, the Company is under an obligation to decommission wind turbines in wind farms. The Company does not have legally restricted assets for the cancellation of these obligations.

The Company has performed a sensitivity analysis relating to the discount rate. The 1% increase or decrease in the discount rate would not have a significant impact on the Company’s results of operations.

11.5.3Provision for legal proceedings

The Company (directly or indirectly through subsidiaries) is a party to several civil, commercial, contentious-administrative, tax, custom and labor proceedings and claims that arise in the ordinary course of its business. In determining a proper level of provision, the Company has considered its best estimate mainly with the assistance of legal and tax advisors.

The determination of estimates may change in the future due to new developments or unknown facts at the time of evaluation of the provision. As a consequence, the adverse resolution of the evaluated proceedings and claims could exceed the established provision.

As of December 31, 2022, the Company has recorded provisions for US$ 102 million in relation to the following processes:

-There are a significant number of files pending before the National Tax Court regarding gasoline exports, where the tax entity challenges the tariff heading assigned by Petrobras in 2008-2014. The Treasury’s position involves a higher export duty rate.
-Petrobras Operaciones S.A. (“POSA”) has filed an international arbitration claim against the Company before the International Chamber of Commerce (“ICC”) on account of alleged breaches to the Assignment Agreement entered into between Petrobras Argentina S.A. (currently Pampa) and POSA in 2016 for the transfer of a 33.6% interest in the “Río Neuquén” Concession. The breaches alleged by POSA in its arbitration claim consist of the failure to transfer certain assets associated with the assigned interest, and differences in the calculation of adjustments in the assignment price. The arbitration is conducted according to the ICC Rules of Arbitration, the applicable law is the one of the Republic of Argentina, and the seat of arbitration is Buenos Aires, Argentina. On April 30, 2021, POSA filed its claim memorial, and on September 15, 2021, the Company submitted its answer to the claim memorial and counterclaim. On December 15, 2021, POSA submitted its answer to the counterclaim. As of the date of issuance of these Consolidated Financial Statements, the proceeding pursues according the schedule decided by the parties.
-The Company filed an international arbitration claim against Petrobras International Braspetro B.V. (“PIB BV”) on account of fraudulent representations and omissions associated with certain export transactions under the share purchase agreement executed on May 13, 2016, whereby the Company acquired 67.2% of Petrobras Argentina S.A.’s capital stock. The arbitration is held under the ICC Arbitration Rules; the applicable law is the one of the State of New York, and the seat of arbitration is New York. On April 29, 2021, the Company filed its claim memorial and PIB BV submitted its counter-memorial and counterclaim seeking the payment of a percentage over the difference between the amount estimated for certain contingencies detected in the purchase process and the amount actually paid for them. On July 7, 2021, the Company and PIB BV submitted their respective answers. On November 5, 2021, the Company and PIB BV submitted their replications, and on December 20, 2021, their rejoinders to the complaints. As of the date of issuance of these Consolidated Financial Statements, the proceeding pursues according the schedule decided by the parties.

Additionally, the Company has recorded provisions for civil, commercial, administrative, labor, tax and customs complaints brought against the Company corresponding to atomized claims with individual unsubstantial amounts, as well as charges for judicial costs and expenses which, as of December 31, 2022, amount to US$ 5 million.

11.6Income tax and minimum notional income tax liability

 

       
    12.31.2022   12.31.2021
Non-current        
Income tax, net of witholdings   161   158
Minimum notional income tax   18   30
Total non-current   179   188
         
Current        
Income tax, net of witholdings and advances   5   20
Total current   5   20

 

Income tax liability

The cumulative CPI variation over the 36 months prior to December 31, 2022 and 2021 has exceeded the 100% condition established by Law No. 27,430; therefore, the effect of the tax inflation adjustment has been accrued in the calculation of the current and deferred income tax provision. Likewise, as of December 31, 2020, the cumulative variation in the CPI has exceeded the 15% condition set for the third transition year pursuant to Law No. 27,430 and, therefore, the effect of the tax inflation adjustment has been accrued in the calculation of the current and deferred income tax provision, except in the cases where, on account of being irregular fiscal years, the mentioned legal parameter has not been exceeded for each of the annual periods.

The tax inflation adjustment mechanism set out in Title VI and different supplementary sections of the Income Tax Law is inconsistent in certain aspects generating a confiscatory lien, including, but not limited to, the failure to update tax losses and the cost of acquisitions or investments made before January 1, 2018, which bears resemblance with the parameters in re “Candy S.A.”, where the CSJN ordered the application of the inflation adjustment mechanism.

As of December 31, 2022, the Company and its subsidiaries hold a provision for the additional income tax liabilities which should have been assessed for the reasons mentioned above. The provision for the period, including compensatory interest, is disclosed under “Non-current Income tax and minimum notional income tax provision”.

Minimum Notional Income Tax liability

The Company and its subsidiaries have filed a petition for declaratory relief under Sect. 322 of the Federal Code of Civil and Commercial Procedure to gain assurance as to the application of the minimum notional income tax for the fiscal years 2011-2018 based on CSJN’s decision in re “Hermitage” passed on June 15, 2010. In this established precedent, the CSJN declared the unconstitutionality of this tax on the grounds that it is unreasonable and it breaches the taxpaying capacity principle when the absence of taxable income in the period evidences that the income presumed by the legislator has not existed.

However, on August 26, 2021, the CSJN dismissed the tax refund claim lodged by the Company for the 2008 and 2009 periods alleging that, despite the evidenced tax losses, the existence of accounting profits is a manifestation of the taxpaying capacity and, therefore, the precepts of the Hermitage precedent are not met.

Considering the CSJN’s current position, the Company and its subsidiaries have recorded, for periods presenting tax losses and accounting profits, liabilities on the amount of the applicable interest on the Notional Income Tax, plus the determined tax provision for those cases in which Minimum Notional Income Tax is not considered to be computable as an Income Tax advance payment. This liability is disclosed under “Non-Current Income tax and minimum notional income tax provision”.

11.7Tax liabilities

 

       
    12.31.2022   12.31.2021
Current        
Value added tax   5   4
Personal assets tax provision    4   2
Tax withholdings to be deposited   5   6
Royalties   12   9
Other   2   2
Total current   28   23

 

11.8Defined benefits plans

The main characteristics of benefit plans granted to Company employees are detailed below:

(i)Pension and retirement benefits: Benefit plan whereby Company employees, in some cases covered by certain collective bargaining agreements, meeting certain conditions are eligible to receive upon retirement, and in some cases, disability or death, a certain number of salaries according to the provisions of the plan or collective bargain agreement, if applicable.
(ii)Compensatory plan: Benefit plan whereby some of the Company employees meeting certain conditions are eligible to receive upon retirement a certain amount according to the provisions of the plan (based on the last computable salary and the number of years working for the Company) after deducting the benefits from the pension system. The plan, until 2003, called for a contribution to a fund exclusively by the Company and without any contribution by the employees. These contributions were derived to a trust fund and were invested in U.S. dollar-denominated money market instruments in order to preserve the accumulated capital and obtain a return in line with a moderate risk profile. Funds were mainly invested in U.S. government bonds, commercial papers rated A1 or P1, AAAm- rated mutual funds and time deposits in banks rated A+ or higher in the United States of America, in accordance with the Trust Agreement dated on March 27, 2002 entered with The Bank of New York Mellon, duly amended by the Permitted Investment Letter dated on September 14, 2006. The Bank of New York Mellon is the trustee and Willis Towers Watson is the managing agent. In case there is an excess, duly certified by an independent actuary, of the funds to be used to settle the benefits granted by the plan, the Company will be entitled to choose to use it, in which case it may have to notify the trustee thereof.

As of December 31, 2022, 2021 and 2020, the most relevant actuarial information corresponding to the described benefit plans is the following:

 

         
  12.31.2022
  Present value of the obligation   Present value of assets   Net liability at the end of the year
At the beginning of the year 33   (4)   29
Items classified in profit or loss           
Current services cost 1   -   1
Interest cost 15   (2)   13
Items classified in other comprehensive
 income		          
Actuarial losses 9   -   9
Benefit payments (3)   -   (3)
(Gain) Loss on monetary position, net (17)   2   (15)
At the end of the year 38   (4)   34
           
           
  12.31.2021
  Present value of the obligation   Present value of assets   Net liability at the end of the year
At the beginning of the year 25   (4)   21
Items classified in profit or loss           
Current services cost 1   -   1
Interest cost 13   (3)   10
Items classified in other comprehensive
 income		          
Actuarial losses 1   2   3
Benefit payments (2)   -   (2)
(Gain) Loss on monetary position, net (5)   1   (4)
At the end of the year 33   (4)   29

 

 

  12.31.2020
  Present value of the obligation   Present value of assets   Net liability at the end of the year
At the beginning of the year 36   (5)   31
Items classified in profit or loss           
Current services cost 3   -   3
Interest cost 16   (2)   14
Items classified in other comprehensive
 income		          
Actuarial (gains) losses (3)   1   (2)
Benefit payments (2)   -   (2)
Reclasification liabilities associated to assets classified as held for sale (10)   -   (10)
(Gain) Loss on monetary position, net (15)   2   (13)
At the end of the year 25   (4)   21

 

As of December 31, 2022, 2021 and 2020, the breakdown of net liabilities per type of plan is as follows: a) US$ 17 million, US$ 15 million and US$ 12 million correspond to the Pension and Retirement Benefits Plan and b) US$ 17 million, US$ 14 million and US$ 9 million correspond to the Compensatory Plan, respectively.

Estimated expected benefits payments for the next ten years are shown below. The amounts in the table represent the undiscounted cash flows and therefore do not reconcile to the obligations recorded at the end of the year.

 

 
  12.31.2022
Less than one year 6
One to two years 3
Two to three years 4
Three to four years 4
Four to five years 3
Six to ten years 14

 

Significant actuarial assumptions used were as follows:

 

         
  12.31.2022   12.31.2021   12.31.2020
Real discount rate 5%   5%   4%
Real wage increase rate 1%   1%   1%
Inflation rate 118%   54%   46%

 

 

The following sensitivity analysis shows the effect of a variation in the discount rate and salaries increase on the obligation amount:

 

 
  12.31.2022
Discount rate: 4%  
Obligation 41
Variation 3
  9%
   
Discount rate: 6%  
Obligation 35
Variation (3)
  (8%)
   
Real wage increase rate: 0%  
Obligation 37
Variation (1)
  (4%)
   
Real wage increase rate: 2%  
Obligation 39
Variation 1
  4%

 

The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. Therefore, the presented analysis may not be representative of the actual change in the defined benefit obligation. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

11.9Salaries and social security payable

 

       
    12.31.2022   12.31.2021
Current        
Salaries and social security contributions   5   4
Provision for vacations   8   7
Provision for gratifications and annual bonus for efficiency   19   17
Total current   32   28