Earnings Call Transcript - CEPU Q4 2025

Operator, Operator

Good morning, ladies and gentlemen. Welcome to Central Puerto's Fourth Quarter of 2025 Earnings Conference Call. A slide presentation is accompanying today's webcast and will be also available on the Investors section of the company's website, centralpuerto.com/en/investors. Please note, this event is being recorded. If you do not have a copy of the press release, please refer to the Investor Relations Support section on the company's corporate website at www.centralpuerto.com. In addition, a replay of today's call will be available in upcoming days by accessing the webcast link at the same section of Central Puerto's website. Our host today will be Mr. Fernando Bonnet, Central Puerto's CEO; Mr. Enrique Terraneo, the company's CFO; Mrs. Maria Laura Feller, Head of Investor Relations; and Mr. Alejandro Diaz Lopez, Head of Corporate Finance. Maria Laura, please go ahead.

Maria Feller, Head of Investor Relations

Good morning, everyone, and thank you for joining us. We will walk you through Central Puerto's fourth quarter and full year 2025 results, discuss key operational and market developments, and then open the line for questions. Before we begin, please note that my remarks may include forward-looking statements and references to non-IFRS measures, such as adjusted EBITDA. These statements are subject to risks and uncertainties, and actual results may differ materially. Definitions and reconciliations are available in our 4Q '25 earnings presentation and financial statements. Revenues for 2025 reached $782.8 million, up 17% year-over-year. 4Q '25 revenues were $172.8 million, decreasing 26% quarter-on-quarter and increasing 3% year-on-year. 2025 adjusted EBITDA was $337.2 million, an increase of 17% year-over-year. And 4Q '25 adjusted EBITDA was $84.7 million, down 16% quarter-on-quarter and up 30% year-on-year. Total generation for the year was 18.6 terawatt hour, down 14% year-over-year, largely reflecting historically low hydrology at Piedra del Aguila. In 2025, we undertook nonrecurring maintenance works in Central Costanera combined cycles and Lujan de Cuyo generation asset. Regarding business performance, 2025 marked a pivotal year of consistent growth and market normalization. The company strengthened its strategic positioning and reinforced its power generation asset portfolio for long-term value creation. Throughout 2025, Argentina's wholesale power market advanced toward normalization. Since November 1, Resolution 400 has supported U.S. dollar-denominated spot prices and recognized a margin over variable costs. In December 2025, 97% of our revenues were denominated in U.S. dollars and we also progressed in the new thermal term market, signing around 11% of total volumes in the contracted market with approximately 900 megawatt hour delivered to industrial customers during November and December. Our CapEx plan in 2025 included fully executed projects over the year and additional projects that allow us to look forward and continue delivering growth. In 2025, our total CapEx was $202.4 million, consisting of concluding projects from 2024 such as the closing of the Brigadier Lopez combined cycle that achieved commercial operation during 1Q '26, and we concluded the San Carlos solar farm project, our first solar greenfield project. The asset reached commercial operation in November 2025, adding 15 megawatts of renewable capacity to our portfolio. Together with Cafayate, our two 2025 solar projects doubled our installed solar capacity and increased our total renewable portfolio by 20%. In 2025, we extended the Piedra del Aguila concession. The company was awarded the concession under the Comahue Hydroelectric Complex privatization process, extending the operating term of the Piedra del Aguila hydroelectric facility through 2055. Winning bid offer was $245 million paid in January 2026. The company is also focused on the battery energy storage system projects, looking forward to add 205 megawatts of new technology in 2027. Our growth plan is backed by our financial strength, flexibility, and low leverage ratio. In December 2025, the net leverage ratio was 0.3x annual adjusted EBITDA, which positions us well to add new financial debt to finance Piedra del Aguila concession extension, the fee payment, and the battery energy storage system projects. 2025 revenues stood at $782.6 million, 17% above 2024 revenues despite the 14% decrease in generation volumes. Spot revenues growth in 2025 reflects additional revenues from the realignment of the spot price over the year and the Resolution 400 since November 2025. We also see the effect of the self-procured fuel oil with the associated cost pass-through in revenues. Offsets came from lower water inflows from Piedra del Aguila and the maintenance works in Central Costanera combined cycles. PPA sales growth includes new MAT contracts in November and December 2025, including also cost of fuels incorporated in the energy component. Renewable revenues increased by 3% as wind farm volumes increased 5% due to higher wind resources and the full contribution from Cafayate solar plant since the end of August 2025. Full year 2025 EBITDA reached $337.2 million, a 17% increase year-on-year, primarily driven by revenue growth, market normalization, and higher margins from self-procured fuels, which added approximately $8 million. In 2025, total generation reached 18.6 terawatt hours, representing a 14% decrease compared to 2024. Central Costanera's generation volumes decreased by 15% year-over-year, primarily due to maintenance work in both Mitsubishi and Siemens combined cycles during 2025. Second, Piedra del Aguila generated 38% less than in 2024, mainly due to historically low water inflows affecting hydro production. Lastly, Lujan de Cuyo was 24% lower year-on-year, largely explained by maintenance work in the co-generation asset in the fourth quarter. Moving to installed capacity, our portfolio reached 6,938 megawatt hours in 2025, representing an increase of 234 megawatt hours compared to 2024. The increase was driven by several developments. Brigadier Lopez combined cycle was completed and the San Carlos solar project added 15 megawatts of solar capacity. Together with Cafayate solar farm acquired in August 2025, these two solar projects contributed to 20% of the renewal capacity additions during the year. Regarding market position, Central Puerto maintained its market leadership, reaching a 14% market share of total SADI generation. Finally, looking at operational performance, our thermal fleet continued to show solid availability levels. In 2025, total thermal availability reached 77%, while combined cycle availability stood at 89%, reflecting strong operational reliability. During 2025, three thermal and renewable projects were completed, combining greenfield developments and M&A transactions, further expanding our generation portfolio. First, the Cafayate solar farm, which was acquired through an M&A transaction, is already in operations. Second, we finalized the Brigadier Lopez combined cycle project, which is also already in operation since January 2026. Third, the San Carlos solar farm entered operations in November 2025. Additionally, we were awarded two battery energy storage system projects, which were granted in August 2025. These projects are currently under development and are expected to begin operations during the first half of 2027. An important milestone regarding the Piedra del Aguila hydroelectric plant was that Central Puerto successfully secured a 30-year concession extension for the plant through the privatization tender process. The concession fee payment was completed successfully in January 2026, marking another key step in strengthening our long-term asset base. In 2025, the Argentine power system reached a new record for demand with a peak of 30,257 megawatts on February 10, 2025. Renewable generation rose 16.5% year-over-year and supplied about 19% of total demand, including hydro renewables representing roughly 39% of the total annual energy mix. Thermal fuel consumption declined 2.6% year-over-year, with gas oil down 53% and fuel oil down 60%, partially offset by a 1.2% increase in natural gas and a 5.2% increase in coal. As of December 31, outstanding financial debt was $337.8 million and the net leverage ratio stood at 0.3x adjusted EBITDA. On December 19, we signed a $300 million syndicate A/B loan with IFC with an average life of 5 years to fund Piedra del Aguila concession fee and Central Puerto's BESS project. Also, our outstanding FONINVEMEM receivable credit was $118 million as of year-end. Overall, 2025 was a year of solid growth and continued progress as the market normalized. During the year, the company kept expanding and strengthening its generation portfolio to support long-term development. Looking ahead, we will focus on three priorities: disciplined contracting, commercialization, operational excellence, and advancing our growth agenda.

Fernando Bonnet, CEO

2025 was a pivotal year for Central Puerto, marked by Piedra del Aguila concession extension by 30 years, portfolio expansion, market normalization, and strategic progress across our assets. We enter 2026 from a position of strength with robust liquidity and a resilient business model. Thank you for your continued confidence in Central Puerto. Please let's stay connected. And now we will open the line for questions.

Operator, Operator

Our first question comes from Martin Arancet with Balanz.

Martin Arancet, Analyst

I have three. I would like to run them one by one, if that's okay. First, I was wondering if you could give us some color on why the decrease in the quarter-over-quarter EBITDA given that the market liberalization should have been at least positive for thermal exposed to the spot market.

Fernando Bonnet, CEO

Martin, thank you for your question and your interest in Central Puerto. The main topic affecting the 4Q 2025 is that we have a strong maintenance in our Central Puerto combined cycle and Mendoza combined cycles, two of our biggest combined cycles. Because of that, we didn't capture the benefits of the new regulation scheme in those units. But it's only regarding that. The rest of the equipment was okay, and the new regulation is in place. So we expect that it will be recovered in the first quarter 2025-26, sorry.

Martin Arancet, Analyst

Okay. And sorry for this follow-up because probably you already disclosed this, but are those plants already working again?

Fernando Bonnet, CEO

Yes, yes, yes, they started working at the end of December and the other one early January. So we don't expect additional maintenance for those units until 2027-28.

Martin Arancet, Analyst

Okay. Then regarding one of your main focuses for 2026, I was wondering how much of the thermal capacity that was under the legacy scheme do you think can compete for energy PPAs? How much of that do you already have contracted? And how do you see the market for signing the rest of the energy that you have? I don't know if you are seeing much interest. I don't know if you have discussed this with distribution companies. If you expect probably a stronger interest from industrial consumers as we approach the winter when you have higher seasonal prices?

Fernando Bonnet, CEO

In terms of our capacity, we can contract 20% of our combined cycles under the spot legacy scheme, which amounts to about 2 gigawatts in total. This 20% pertains to private customers, particularly large industries. Currently, we are operating at that 20% level. From January through March, we plan to fulfill that contracted capacity. To exceed this, we need to engage with distribution companies, which is progressing slowly. These companies must coordinate discussions with various regulators, which include both federal and local authorities in each province. This process is taking time as they need to talk about and secure a pass-through option to transfer costs to demand. Therefore, at present, we are not involved in many transactions with distribution companies. We are in discussions and making progress, but significant deals have not yet been finalized. We anticipate that such activity could begin within this year.

Martin Arancet, Analyst

Okay. Right. So do you think that to sign contracts with distribution companies, you probably will require some backup from CAMMESA or something like that, like happened with the battery project?

Fernando Bonnet, CEO

No, no, no, no. Of course, we're going to make our credit analysis, and we're going to pick the distribution companies that we think are suitable for credit, but we don't request additional CAMMESA backup. Regarding legacy energy selling because this is month-on-month, and we can cut the provision if they don't pay. But talking about other projects like new generation or perhaps, this is different. This will be different.

Martin Arancet, Analyst

Okay. And my last question then regarding the other main focus that you will have for 2026. I was wondering where do you see growth opportunities coming this year and probably next year? Because it seems that there are not enough incentives yet to add thermal capacity. Now with the thermal capacity competing also for PPAs with renewables, we have seen lower tenures in new PPAs and at slightly lower prices. So I don't know if adding more battery is now the best idea. There have been a lot of comments regarding new renewable capacity for mining and oil and gas, but it doesn't appear to have materialized yet. So I was wondering where you see the growth opportunities coming in the near term.

Fernando Bonnet, CEO

Okay. Well, first of all, we have right now an auction in place for new battery storage systems for provinces other than Buenos Aires that we got awarded last year. We are looking for opportunities in different provinces: Santa Fe, Mendoza, Corrientes, Cordoba. This new auction is in place and will have the due date in May this year. So this is an opportunity for expansion that we're going to look at. As you mentioned, in terms of renewables, right now, it's getting difficult to secure new PPAs with existing demand. So we are looking for new demand. For existing demand, as you mentioned, mining companies are one of them. Oil and gas companies are other possibilities, companies that need to gain efficiency in their processes, like introducing steam; perhaps we can work on co-generations there. We also expect to see an auction for new capacity that needs to be set for covering specific areas like Buenos Aires area, and I see there are opportunities. Not, as you mentioned, trying to catch the existing demand with renewables because it's been challenging right now as the thermal energy is entering the market and stressing prices. Also, the hydros are entering the market and putting some pressure there as well. But I see opportunities in storage system capacity, in new demand coming from new players in the market like mining companies and a possibility for new thermal capacity coming in some auctions during this year.

Martin Arancet, Analyst

Okay. Great. So this thermal auction that you mentioned, is it something similar to the Terconf that got canceled?

Fernando Bonnet, CEO

Well, it's not completely established by the government yet, but we have discussed with them that it could be something similar, but perhaps with a different approach to the demand, something like receiving a payment for capacity from CAMMESA. But well, it is something that is under discussion right now.

Operator, Operator

We are going to go now for the question with Lucas Lombardo with BACS.

Lucas Lombardo, Analyst

I want to know the percentage of new term contract that contributes to the income for the company.

Fernando Bonnet, CEO

Okay. I think you are referring to how much of the 20% that we can sell to private consumers we reach. That is the question. Yes. We expect to cover all those 20% during March.

Operator, Operator

Our next question comes from Matias Cattaruzzi with Adcap.