Empresa Distribuidora y Comercializadora Norte SA (EDN) 2022 Q1 法說會逐字稿

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. (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 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 turn the conference to Mr. German 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 in the results of the period or any doubts you may have.

We first will be focused on the highlights. Edenor continues to guarantee the 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 continues to improve people's quality of life, business and community developments as well as that of our employees and shareholders and bondholders.

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 services as well as better management of its resources. The key indicators, SAIDI and SAIFI, represent the duration and frequency of energy cuts for the last 3 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 the inflation differences and the tariff that has been frozen for this period. Edenor announced the results of -- on May 10 of the offer to exchange Class #9 negotiable obligations with 73.25% acceptance.

We would like to thank to all the holders who have participated. Public hearing on April 18, 2022, the Argentina executive branch convened public hearings to be held on May 10, 11 and 12 with the aim of dealing with the following issues.

New seasonal reference prices of the seasonal prices of electricity energy in force as of June 1, 2022. Implementation of segmentation in the granting of the energy prices, subsidies by the national government to users of natural gas and electricity services for all -- for the years 2022 and 2023. In these hearings, there is no additional value-added tax for the distribution electricity companies.

Debt restructuring. The result of offer of the exchange Class 9 negotiable obligations issued by the company with maturity on October 25, 2022, for new negotiable obligations class #1 was 73.25% acceptances. Restructuring accordingly to a total of 52,706,268 corresponding to exchange offers filed under Option A for 43,783,950 and redemption offer orders filed under Option B for 30,470,118.

Additionally, interest has been paid for the first -- from the last payment dated and including the settlement date totaling $329,573. The debt structure of the no sale obligations of the company based on the exchange offer received would be composed as following.

Remaining shares -- remaining obligation -- negotiable obligations class #9 26,231,000. New obligations under the new N1 52,706,258 totaling the [98,570] ratings. Credit rating agencies Fitch, Moody's and Standard & Poor's updated an announced rating as regarding the debt. Standard & Poor's has keep the actual rating of raCCC+ changing to a positive outlook. Fitch has been included as a rating agency with A- with a negative outlook. Fitch has also concluded that these new bonds class #1 are aligned with the 4 principles components of social bonds principle of the ICMA and BYMA authorized the incorporation of these new issues to the CVS bonds panel.

First quarter results. The gross margin corresponding to the first quarter of 2022 was ARS 12,452 million, which represents a fall of 3% compared to the same period of the previous year. The under-established new tariff schemes, which are effective as of March 1, setting a bad increase of only 8%.

EBITDA decreased ARS 110 million, reaching 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 are no adjustments to the EBITDA between the comparison periods.

The volume of energy sales increased by 5%, reaching 5,470 gigawatts in the first quarter of 2022 against 5,212 gigawatts for the same period of 2021. Furthermore, Edenor customers base rose by 2.3% compared to the same period of the previous year, reaching more than 3.2 million of customers mainly on 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 6,441 integrated energy meters that were mainly intended to regularize clandestine connections.

Financial results experienced a decrease, reaching ARS 9,846 million in the first quarter of 2022. Again, the losses of ARS 6,730 million in the first quarter of 2021. The difference is mainly due to a higher interest accrued in the debt incurred by CAMMESA, which is of ARS 32,640 million.

Net results decreased by ARS 1,800 million, recording losses for ARS 2,818 million in the first quarter of '22 against a loss of ARS 1,018 million for the same period in 2021.

In addition, there was a lower loss in the operating income, higher financial charges due to the deferral of the payment of obligations with the wholesale electricity market and higher results for exposure to exchange in purchasing power.

Capital expenditures. During the first quarter of 2022, Edenor's capital expenditures totaled ARS 2,684 million against 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 legal requirements. ARS 93 million in communications and telecontrol. ARS 302 million in other investment projects.

Services quality standards. Quality standards are measured based on the duration and frequency of services outages using SAIDI and SAIFI indicators. SAIDI refers to the duration of outages and measures the number of outages hours a user experienced per year. And SAIFI represents the frequency of outages and measures the number of times a user experienced an outage during the year.

At the closing of the first quarter of 2022, SAIDI and SAIFI indicators for the last 3 months were 10.4 hours and 4.1 outages on average per client per year. evidencing 13% and 11%, respectively, improvement compared to the same period of the previous year. In turn, these indicators are 13% and 24% lower than the target value required by the RTI for January 2022.

This recovery in service levels is mainly due to the investment plan devised by the company since 2014. The difference improvements, implementation in the operating processes and the adoption of technology applied to the grid operations and management.

Energy losses. In the first quarter of 2022, energy losses experienced a 13.8% decrease against 16% decrease for the same period of the previous year. Costs associated with these losses increased 34%. This results in ARS 789 million improvement in real terms.

The works of multidisciplinary teams to develop new solutions to energy losses continue as well as a market discipline actions aiming to reduce them. Analytical and artificial intelligence tools were used to enhance effectiveness in the routing of inspections and lean actions continues with the objective of detecting and normalizing irregular connections, fraud and energy theft.

In addition, during 2022, 7,928 inspections of tariff 1 residential users were conducted with 52% efficiency, while the same period of the previous year, 413,000 inspections were conducted with a 52% efficiency. Moreover, 6,445 integrated energy meters were installed during 2022.

Regarding the recovery of energy, besides the normalization of customers with the MIDE meters, clandestine customers with conventional meters were also put back to normal. Moreover, a new energy balance system was implemented as well as the development of micro balances in private neighborhoods. In all cases, a striking rate of recidivism in fraud has been observed.

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

There are no questions. Are there any questions on the floor?

Okay. Thanks for joining this conference call. Please keep you and your family safe and healthy. Have a good day. Thank you, everybody. Bye-bye.