Edenor Q1 FY2022 Earnings Call

Good morning, ladies and gentlemen, and thank you for joining. At this time, we would like to welcome everyone to Edenor's First Quarter 2022 Earnings Conference Call. We would like to inform you that this event is being recorded, and all participants will be in listen-only mode during the presentation. After the company's remarks are completed, there will be a question-and-answer section through the webcast chat. Before proceeding, let me mention that forward-looking statements are based on the belief and assumptions of Edenor's management on information currently available to the companies. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Edenor and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference to Mr. Germán Ranftl, CFO of Edenor. Thank you.

Good morning everyone, and thank you for joining. Welcome to Edenor earnings webcast for the first quarter of 2022. I truly hope that you and your family are safe and healthy. As you know, you can always call any member of our team for more details on the results of the period, or any doubts you may have. We will first focus on the highlights. Edenor continues to guarantee electric distribution services to all its 3.2 million customers, which represents a population of approximately 11 million people. Our mission is to provide a socially responsible electricity distribution service, leading the energy transition that contributes to improving people's quality of life, business and community developments, as well as that of our employees and shareholders. We are committed to our community, which is why we have adopted the best environmental, social, and governance practices. Edenor was able to improve its quality of services, as well as better management of its resources. The key indicators SAIDI and SAIFI represent the duration and frequency of outages for the last three months, showing an improvement of 13% and 11% compared with the same indicators as of March 2021. Revenues from sales were 7% lower than the first quarter of 2021 in real terms, mainly due to inflation differences and the tariff that has been frozen for this period. Edenor announced the results on May 10 of the offered exchange for class nine obligations with 73.25% acceptance. We would like to thank all the holders who have participated. During a public hearing on April 18, 2022, the executive branch convened public hearings to be held on May 10, 11, and 12, with the aim of addressing the following issues: new seasonal reference prices for electricity energy, effective as of June 1, 2022; the implementation of segmentation in the granting of energy price subsidies by the National Government to users of natural gas and electricity services for the years 2022 and 2023; and no additional value-added tax for distribution electricity companies. Debt restructuring was also addressed. The results of the offer for the exchange class nine newer showed obligations issued by the company with maturity on October 25, 2022, with 73.25% acceptance. Restructuring corresponds to a total of $52,706,268 for exchange offers filed under option A for $43,793,950 and redemption order filings under option B for $30,470,118. Additionally, interest has been paid from the last payment date, including the settlement date, totaling $329,573. The debt structure of negotiable obligations of the company, based on the exchange offer received, would consist of remaining shares, remaining obligations, and negotiable obligations class number nine, $26,231,000. New obligations under the new N1 52600-700-6258 total $98,570. Ratings from credit rating agencies such as Fitch, Moody's, and Standard & Poor's updated their ratings regarding the debt. Standard & Poor's has maintained the actual rating of RA CCC+, changing it to a positive outlook. Fitch has concluded with a rating of negative outlook. Fitch has also included that these new bonds, class one, align with the four principle components of social bonds principles of the ICM BMA, and authorized the incorporation of these new issues into the CBS bonds panel. The gross margin corresponding to the first quarter of 2022 was ARS $12,452 million, marking a fall of 3% compared to the same period of the previous year. The newly established tariff schemes effective as of March 1st indicate an increase of only 8%. EBITDA decreased by ARS $110 million, showing a positive result of ARS 1.329 million in the first quarter of 2022, compared to a gain of ARS 1.439 million in the same period of the previous year. There were no adjustments to the EBITDA between the comparison periods. The volume of energy sales increased by 5%, reaching 5,470 GS in the first quarter of 2022 compared to 512 GS for the same period in 2021. Furthermore, our customer base rose by 2.3% compared to the same period of the previous year, reaching more than 3.2 million customers, mainly due to the increase in residential customers and small commercials as a result of market discipline actions and the installation of more than 600,441 integrated energy meters last year that aimed to regularize connections. Financial results experienced a decrease, reaching ARS $900,846 million in the first quarter of 2022, against losses of ARS $6,730 million in the first quarter of 2021. The difference is mainly due to higher interest accrued in the debt incurred by CAMMESA, which amounts to ARS $32,614 million. Net results decreased by ARS $1,800 million, showing recorded losses of ARS $2,818 million in the first quarter of 2022, against a loss of ARS $1,018 million for the same period in 2021. Additionally, there was a lower loss in operating income, higher financial charges due to the deferral of payments of obligations with the wholesale electricity market, and increased results due to exposure to exchange and purchasing power. In the first quarter of 2022, Edenor's capital expenditures totaled ARS $2,684 million, compared to ARS $3,920 million in the first quarter of 2021. Investments for the period were as follows: ARS $487 million in new connections, ARS $696 million in grid enhancement, ARS $719 million in maintenance, ARS $23 million in year requirements, ARS $93 million in communications and telecontrol, and ARS $302 million in other investment projects. Quality disturbance was measured based on the duration and frequency of services, utilizing SAIDI and SAIFI indicators. SAIDI refers to the duration of outages, while SAIFI represents the frequency of voltage fluctuations experienced by users annually. At the closing of the first quarter of 2022, SAIDI and SAIFI indicators for the last three months were 10.4 hours and 4.1 hours on average per client per year, evidencing 13% and 11% improvements, respectively, compared to the same period in the previous year. In turn, these indicators are 13% and 24% lower than the targets required by the RTI for January 2022. This recovery of service levels is mainly due to the investment plan devised by the company since 2014. The improvements in implementation and the operating processes, along with the adoption of technology applied to our operations and management, have contributed to this progress. Energy losses in the first quarter of 2022 showed a 13.8% decrease compared to a 16% decrease for the same period in the previous year. Costs associated with these losses increased by 34%, resulting in a real-term improvement of ARS $780 million. We work with disciplinary teams to develop new solutions for energy losses, as well as market discipline actions aimed at reducing them. Analytical and artificial intelligence tools were used to enhance the effectiveness of inspections. Additionally, we conducted 7,928 inspections of residential users with a 52% efficiency rate. In the same period of the previous year, 413,000 inspections were conducted with a 52% efficiency rate. Moreover, 6,445 integrated energy meters were installed during 2022. Regarding the recovery of energy, both customers and clients with media meters, as well as those with conventional meters, were normalized. Furthermore, a new energy balance system was implemented, alongside the development of microbalances in private increases. In other cases, a striking rate of recidivism in energy fraud has been observed. This concludes my review of Edenor, and I would like to thank you for the support shown by our investors and bondholders, as well as your interest in participating today. We are now open for questions through our chat.

Thank you, Germán. Please keep you and your family safe and healthy. Have a good day. Thank you everybody. Bye bye.