EDN — Empresa Distribuidora y Comercializadora Norte Sociedad Anónima

Summary of Edenor's Q3 2022 Earnings Call

1. Key Financial Results and Metrics

• Revenues: Decreased by 11% in real terms compared to Q3 2021, primarily due to insufficient tariff adjustments.
• Gross Margin: Fell to ARS 14,730 million, down 34% year-over-year.
• EBITDA: Reported a loss of ARS 2,703 million, attributed to lower revenues and rising operating costs.
• Net Loss: Increased to ARS 20,615 million, a 130% rise from the previous year, largely due to higher interest expenses.
• Customer Base: Grew by 1.5%, reaching over 3.2 million customers.
• Energy Sales Volume: Increased by 3.2% to 5,979 gigawatts.
• Energy Losses: Decreased by 17.7% compared to 18.8% in the prior year.

2. Strategic Updates and Business Highlights

• Edenor continues to provide electricity to 3.2 million customers, serving approximately 11 million people.
• The company has maintained service quality, achieving historical bests in SAIDI and SAIFI metrics, with improvements of 19% and 13%, respectively.
• Successfully completed a debt exchange involving $98.057 million, with 77.35% bondholder support, leading to improved credit ratings from Moody's and S&P.
• Capital expenditures for the first nine months totaled ARS 16,802 million, a decrease of 11% from the previous year, but still focused on maintaining service quality.

3. Forward Guidance and Outlook

• The company is awaiting the approval of the 2023 budget law, which may initiate an internal tariff review within 90 days. The specifics of this review are not yet determined.
• There is a six-month grace period for the regularization of a USD 1 million debt with CAMMESA, with a potential 96-month payment plan to follow.

4. Challenges and Points of Concern

• The lack of adequate tariff adjustments since 2019 has significantly impacted revenues and margins, with inflation at 222% during the same period.
• Financial losses have escalated due to increased interest charges and operational challenges.
• The regulatory environment remains uncertain, particularly regarding future tariff adjustments and the impact of government subsidies.

5. Notable Q&A Insights

• Management indicated that the specifics of the tariff review process will depend on the 2023 budget approval.
• Regarding the debt with CAMMESA, a structured repayment plan is anticipated, but further discussions are pending legislative approval.
• The segmentation of tariffs for wealthier consumers has already been implemented, but it does not affect Edenor’s value-added distribution.

Overall, while Edenor has shown resilience in maintaining service quality and managing its customer base, significant financial challenges persist due to regulatory constraints and economic pressures.