Petrobras (PBR)

Release agreement between Petrobras Energia S.A. (PESA) and ENRON CORP. on investments in Companhia de Inversiones de Energia S.A. (CIESA)

Companhia de Inversiones de Energia S.A. – CIESA is an entity jointly controlled by PESA and ENRON. Aiming at restructuring CIESA’s debt, its shareholders signed an agreement on April 30, 2004 which, subject to the fulfillment of certain conditions, sets forth the following share transfers:

• At a first stage ENRON will transfer, to a trust or to an alternative entity, 40% of CIESA’s shares from the total 50% owned by ENRON;

• PESA will transfer to ENRON its 7,35% direct interest in the capital of TGS;

• In accordance with CIESA’s debt restructuring, at a second stage, ENRON will transfer its remaining 10% interest in CIESA’s capital to the trust or alternative entity. In turn, ENRON will receive 4,3% of TGS shares.

The approval of such operation by ENERGAS, the regulatory body of the gas market in Argentina, is a condition for the agreement to become effective. Under no circumstances will PESA hold direct or indirect control of CIESA.

For operating under long-term restrictions that significantly impair its capacity to transfer funds to investors, CIESA is excluded from the consolidation process of PESA and, therefore of PETROBRAS, in accordance with CVM Instruction 247/96.

Additionally, on December 31, 2004, CIESA’s debt amounts to US$ 220 million, with an original maturity in April 2002, which has not been settled as a consequence of the macro-economic scenario in Argentina. CIESA’s management has currently been negotiating an extension for the debt settlement with debtors.

With a view to obtaining an extension for the payment term of its short-term debt and to extending its debt profile as well as to amending certain financial covenants included in the agreements, on February 24, 2003, TGS, a subsidiary of CIESA, implemented a debt restructuring process covering almost all of its debt in the amount of US$1.027 million.

In December 2004, TGS completed its debt restructuring process and obtained approval for the proposal submitted by 99,76% of creditors. The restructuring consisted in exchanging existing debt securities for payments made and for the issuance of new notes (to creditors holding this type of instrument) or private debt securities (intended to extend the term of short-term financial liabilities). With regard to loans granted by the IDB, not only did TGS pay part of the debt but also signed new loan agreements.

The terms and conditions of the debt restructuring subject the company to certain restrictions, especially with regard to new loan agreements, capital investments, payment of dividends, granting of guarantees on assets and results and sale of assets.