Empresa Distribuidora y Comercializadora Norte SA (EDN) 2022 Q4 法說會逐字稿

Ladies and gentlemen, and thank you for joining. At this time, we would like to welcome everyone to Edenor's Fourth Quarter 2022 Earnings Conference Call. We would like to inform you that this event is being recorded. (Operator Instructions) Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Edenor's management and on information currently available to the company.

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 attainments.

Now I turn the conference over to Mr. German Ranftl, CFO of Edenor. Thank you.

Good morning, everyone, and thank you for joining. Welcome to Edenor earnings webcast for the fourth quarter 2022. 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 might have.

Client satisfaction. Edenor continues to guarantee the electricity distribution services to all its 3.2 million customers, which represents a population of approximately 11 million people. Our mission is to provide a social responsible electricity distribution service, leading the energy transition that contributes to improve people's quality of life, business and community developments as well that of our employees, bondholders and shareholders.

We are committed to our community, which is why we have adopted the best environmental, social and governance practices. We will first focus on the highlights, Edenor has exceeded the investment levels during 2022. As a result of that, the company was able to maintain its quality of services for its -- all its clients with a record result in our customers' perception of the quality of service, reaching our best records in our key indicators: SAIDI; and SAIFI, representing the duration and frequency of energy cuts. For the last 3 months, show an improvement of 19% and 13% compared to the same period of last year and extremely below the requirements applied by the regulatory entities.

Regulatory framework. On December 29, 2022, an agreement of [Regularization] of Obligations Act was signed in accordance with the provision of Article 87 of the law 27,591 approved by the Congress. The agreement included the cancellation of debt for ARS 57,159 million for the periods expired since 2020 September and August 2022. And a credit recognition of ARS 24,174 million. The remaining debt of ARS 38,650 million will be canceled as established in the law in 96 monthly installments with a 6 months of grace period and with a 50% interest rate applied by the CAMMESA.

On February 28, 2023, the Regulatory Entity, ENRE, approved the new tariff charts being 107% as of April 1 and an additional 74% for June 1, 2023, representing an adjustment of approximately 60% average of the residential customers. Level 1 users' consumption on average of 238 kilowatts/months will have an increase of ARS 348 in the invoice in April and ARS 421 in the invoice of June.

These Acts done by the government have been a very good indication that Debt sector is being reorganized and reestablished. Regarding our corporate debt, as we announced previously on October 25, 2022, Edenor completed its cancellation and voluntary exchange of the financial debt of the Class 9 series notes for a total of $98 million, issuing a new obligation of $55 million maturing in May 2025, listed in the social green and sustainable panel in BYMA as a social bond.

In addition, a senior note Class 2 were issued in March 7, 2023, of this year for $30 million maturing in November 2021.

We would like to thank you, all our bondholders and investors, for the trust in our company, considering the company received orders of more than $50 million for the last issuance.

Slide 8 is ratings. This is the summary of our credit ratings. In February 2023, FixScr and Moody's confirmed their rating due to the issuance of the additional senior note Class 2 due on November 2024.

Gross margin. The gross margin corresponding to the fourth quarter 2022 was ARS 10,689 million, which represents a fall of 39% compared to the same period of the previous years. The accumulated gross margin as of December 31, 2022, was of ARS 6,607 million, which represents a fall of 26% compared to the same period of the previous year, mainly due to the lack of rate adjustments of ARS 25,016 million and an energy loss of ARS 1,637 million, offset by a higher demand of ARS 4,136 million.

In terms of EBITDA, the EBITDA has been positive in ARS 14,074 million in the fourth quarter of 2022, considering the effects of the agreement regarding CAMMESA debt which resulted in a gain of ARS 18,136 million, a decrease in revenues of 2%, a decrease of 2% in operating cost and a decrease in unrecognized losses of 15.6%. The accumulated EBITDA as of December 31, 2022, is ARS 6,144 million.

Energy sales evolution. The volume of energy sales increases by 4.7% -- 4.1%, reaching 5,457 gigawatts in the fourth quarter of 2022, against 5,241 gigawatts for the same period of 2021. Furthermore, Edenor customer base rose by 1.1% compared to the same period of the previous years, reaching more than 3.2 million of customers, mainly on the account of the increase in residential customers and small commercials as a result of the market discipline actions and the installation over the last year of more than 41 integrated energy meters that were mainly intended for the Regularization of the clandestine connections.

Financial results were a loss of ARS 28, 279 million for the fourth quarter of 2022. During the whole year, the losses increases 75%. This difference is mainly due to the higher interest accrued on the debt incurred by CAMMESA. As explained before, on the agreement with CAMMESA was signed and the remaining balance of ARS 38,650 million will be [canceled] in 96 installments with a 6-month grace period and 50% interest rate.

Net income decreases by 11%, reaching a -- losses of ARS 14,368 million in the fourth quarter of 2022 against ARS 12,935 million for the same period of 2021. There was a higher loss in the operating income, higher financial charges due to the deferral of the payment of obligations with the wholesale electricity market and a higher positive result for exposure to exchanges in purchasing power, RECPAM.

Capital expenditures during 2022. Edenor's capital expenditures totalized ARS 33,900 million against ARS 31,653 million in 2021, an increase of 7% in real terms compared to the same period of the previous year. Investment for the fourth quarter of 2022 were as follows: ARS 10,863 million in electricity-related activities, ARS 1,735 million in systems and others, and ARS 1,349 million in project staff and cost. In order to meet demand, improved services quality and reduced nontechnical losses, most of the investments were assigned to increase in capacity, installation of remote control equipment and the medium voltage network, connections of new supplies and installation of self-management energy meters. All investments are made prioritizing the protection of the environment and the safety on public roads.

Energy losses. In the fourth quarter of 2022, energy losses experienced 15.6% decrease against 16.6% for the same period of the previous year. The works of multi-disciplinary teams to develop new solutions to energy losses continues as well our market discipline BYMA actions aiming to reduce them. Analytical and artificial intelligence tools were used to enhance effectiveness in the [routing] of inspections. And BYMA actions continues with the objective of detecting and normalizing irregular connections, fraud and energy sales.

In addition, during the period from October to December 2022, 83,141 inspections of Tariff 1 were conducted with a 56% efficiency for the same period of the previous year, 123,486 inspections have been conducted with a 45.1% efficiency. Moreover, 15,086 integrated energy meters were installed during 2022. Regarding the recovery of energy, besides the normalization of customers with MIDE meters, clandestine customers with conventional meters were also put back to normal. Moreover, a new energy balance system was implemented as well as a development of micro balances in private neighborhoods. In all cases, a rate of revision in product has been observed.

To conclude, let me summarize the principal events occurred since the change of control. On June 30, 2021, EDELCOS acquired the control of Edenor. July 20, 2021, consent from the change of control acceleration cost was reached successfully. Between April and October 2021, the bond debt of $98 million was exchanged and canceled, issuing a new bond of $55 million due in 2025 and enlisted in BYMA as a social bond. In September of 2022, a new bond Class 2 of $30 million was issued, a 9.75% interest rate, Argentine law and will be due in November 2024.

As a result of the debt -- as a result, debt maturity horizons cleared for year 2023. By the year end of 2022, we reached our best historical records and services quality regarding frequency and duration of power outages as well as customer satisfaction index. We also signed the agreement to cancel and compensate with credits with CAMMESA according to the law approved by the Congress. With our remaining debt to be paid in installments as explained before. Recently, the new tariff approval will help to reach the path of normalization of the sector.

Finally, last March 7, the company issued an additional note for $30 million, receiving orders for more than $50 million. All of the above shows our management KPIs reaching as well as we would like to thank you again for the trust of our investors.

This concludes my review on Edenor. And I would like to thank you for the support shown for our investors and bondholders and your interest in participating today. We are now open for questions through our chat.

Hello, yes. We think that -- let's clarify. CAMMESA, of course, we will comply with what has been signed and agreed with CAMMESA and regulatory entity and the Secretary of Energy. So we will comply with the agreement signed. And regarding the first part of the question, the VAD adjustment for 2023. We are now -- we have received VAD increase, which is not the VAD increase that we were looking for, but we are adjusting our numbers in order to comply with the agreement of CAMMESA and also comply with the CapEx and OpEx that we need from the company. So we are adjusting our projections in order to comply with all our requirements and of all our agreements signed. So we will match the VAD that we have received with the OpEx and CapEx and the agreement of CAMMESA. So we would not -- we would not show a deficit in 2023.

So if there are no more questions, I would like again to thank you for participating in this conference call, and have a nice weekend to all of you. Thank you very much. Bye-bye.