EDN — Empresa Distribuidora y Comercializadora Norte Sociedad Anónima

Summary of Edenor Q3 2022 Earnings Call

1. Key Financial Results and Metrics

• Revenues: Decreased by 11% in real terms compared to Q3 2021, primarily due to the lack of Value Added Distribution (VAD) adjustments.
• Gross Margin: Fell to ARS 14,730 million, a 34% decline year-over-year.
• EBITDA: Reported a loss of ARS 2,703 million, attributed to reduced revenues and increased operating costs.
• Net Loss: Increased to ARS 20,615 million, up 130% from the previous year, with net results showing a loss of ARS 6,082 million, a 450% increase year-over-year.
• Energy Sales Volume: Increased by 3.2%, reaching 5,979 gigawatts.
• Customer Base: Grew by 1.5%, totaling over 3.2 million customers.

2. Strategic Updates and Business Highlights

• Edenor continues to provide electricity distribution services to 3.2 million customers, impacting approximately 11 million people.
• The company has improved its service quality, with key indicators SAIDI and SAIFI showing historical improvements of 19% and 13%, respectively.
• Successfully completed a debt exchange for Class 9 negotiable obligations, with 77.35% bondholder support, improving credit ratings from Moody's and S&P.

3. Forward Guidance and Outlook

• The company is awaiting the approval of the 2023 budget law, which may lead to an internal tariff review within 90 days post-approval.
• Future tariff adjustments and methodologies remain uncertain and will depend on regulatory discussions following the budget approval.

4. Bad News, Challenges, or Points of Concern

• The lack of adequate tariff adjustments since 2019 has significantly impacted revenue and profitability.
• Increased financial charges due to debt obligations with CAMMESA and the deferral of payments are straining financial results.
• The company faces ongoing economic challenges in Argentina, including high inflation (222% since 2019) and regulatory uncertainties.

5. Notable Q&A Insights

• Management indicated that the internal tariff review process will commence after the 2023 budget is approved, but specifics on methodology remain unclear.
• Regarding the debt with CAMMESA, a six-month grace period followed by 96 months of payment installments was discussed, pending legislative approval.
• The segmentation of tariffs for wealthier consumers has been implemented but does not directly affect Edenor's value-added distribution, as it primarily serves as a pass-through mechanism for government subsidies.

Overall, while Edenor has maintained service quality and improved certain operational metrics, significant financial losses and regulatory uncertainties pose ongoing challenges for the company.