Central Puerto S.A.

Morning and welcome to the Central Puerto conference call following the results announcement for the quarter ended on June 30th, 2020. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. If you do not have a copy of the press release, please refer to the investor support section on the company's corporate website at www.centralpuerto.com. A replay of today's call may be accessed by accessing the webcast in the investor support section of the Central Puerto corporate website. Before we proceed, please be aware that all financial figures were prepared in accordance with the IFRS and stated in Argentinian pesos unless otherwise noted. It's worth noting that the financial statements for the quarter ended on June 30, 2020, include the effects of the inflation adjustment. Accordingly, the financial figures mentioned during the call, including the data from previous periods and growth comparisons, have been stated in terms of Argentinian pesos of the end of the reporting period. Also, please note that certain statements made by the company during the conference calls our forward-looking statement, and we refer you to the forward-looking statement section of our earnings release recent filings with SEC. Central Puerto assumes no obligation to update forward-looking statements except as required under applicable securities laws. For the following discussion better, please download the webcast presentation available on the company's website. Please be aware that some of the numbers mentioned during the call may be rounded in order to simplify the discussion. On the call from Central Puerto is Jorge Rauber, Chief Executive Officer, Fernando Bonet, Chief Operating Officer, Milagros Grande, Financial Manager, and Tomas Daglian, Investor Relations Officer. And now I will turn the call over to Jorge Rauber. Mr. Rauber, you may begin.

Thank you very much. Good morning. I would like to begin today's call analyzing the developments of the second quarter Comment on the advances of our extension projects and analyze the operating figures of the quarter. Fernando will then analyze the financial results of the quarter and will answer any questions that you may have. As you know, the COVID-19 crisis has affected almost all the world, including Argentina. The mitigation measures issued by the federal government, such as the stay-at-home order, quarantine have remained in place. although some degree of flexibilization and exception have recently been approved. As a consequence, as you can see on page three, electric energy demand decreased 11% in April and 7.6% in May 2020, as compared to the same month of the prior year. However, demand increased 1.2 in June due to higher economic activity and lower average temperatures. Therefore, during the second quarter of 2020, Electricity demand decreased 5.5% as compared to the same period of the prior year. Additionally, in July, demand increased 1.5%. However, it's worth noting that the decrease has a less than proportional impact in the income of the generation companies. In the case of renewable energy units, they have unaffected since they have dispatched priority, so they can sell all the generated electricity. In the case of thermal units, they have a high proportion of their income associated to fixed power remuneration, which is not related to the energy generation of the units. Additionally, when demand decreases, the units that stop generating electricity first tend to be the older, inefficient ones. These units receive a lower remuneration under the Energía Base framework as compared to the new, efficient ones that have a higher remuneration through contracts also known as Power Purchase Agreements of PPA. Going now to page four, as you may recall, the measures adopted to prevent the spread of the COVID-19 virus had an impact on the progress of our projects under construction, like the November 1 wind farm and Terminal 6 nuclear generation unit. In the quarter, we continue with advances in the project and restrict health and safety protocols to protect our personnel and the community. Taking into account the consequences of the quarantine, the Energy Secretariat instructed Camisa to extend the due date for the commercial operation date, or COD, of the project's 185 days. Regarding the regulatory framework for the energy of asset units, as we mentioned in our prior calls, on February 27, 2002, the Secretariat of Energy issued Resolution 31, which changed the prices for the units. which were set in pesos with a monthly adjustment using a mix between the consumer price index and wholesale price index. However, in April 8, 2020, the Secretary of Energy, in the context of the COVID-19 crisis, instructed Kamesa to postpone until further notice such adjustment. As of today, the mechanism remains suspended. Finally, regarding our Renewable Energy Division, on June 24, 2020, the Board of Directors of Central Puerto, with the aim of increasing the exposure of the company to this segment, authorized the purchase of the minority shareholder stake of CP Renovables, holding Central Puerto now a 100% stake in the company. CP Renovables owns, through a special purpose vehicle subsidiary, five wind farms, with a total installed capacity of 244 MW. All of them are fully operational, performing above the expected low factor and have long-term power purchase agreement under which they sell their electricity production. Following the same trend of the rest of the world, renewable energy is rapidly gaining ground in the Argentina matrix in 2018, Renewable generation in Argentina represented 5.8% of total production and is expected to increase significantly in 2020, in which Central Puerto is one of the leading companies. Going now to our key performance indicators for the quarter, as you can see on page five, energy generation during the second quarter was 2.7 terawatt hours of electricity, 18% lower than the same period of 2019. This was to a large extent due to the Lujan de Cuyo combine cycle, which became unavailable in mid-April due to a significant failure in its main transformer. On July 16, 2020, after replacing the damaged equipment with a backup transformer stored in our Buenos Aires plant, the unit became online again. The downtime implied a reduction of the energy generation and power availability, which had a significant economic impact during the second quarter, but will be mitigated by a comprehensive operation of risk and loss of profit insurance. Due to this effect, energy generation decreased 0.5 terawatt hours in the second quarter 2020 as compared to the same period of the previous year. Additionally, due to the effect of the quarantine, the rest of the thermal units reduced their energy generation to 146 terawatt hours. On the other hand, renewable energy increased 158 MWh due to the positive impact of La Castellana II, La Genoveva II, Manche and Los Olivos wind farms. Regarding our thermal units, the availability dropped to 82% as a consequence of the damage in the Luján de Cuyo common cycle. Now I will turn the call over to Fernando, who will comment on the financial highlights. Thank you, Jorge. I will first refer to the result of the second quarter of 2020 as compared to the second quarter of 2019. As you can see on page six, our revenues were 7.2 billion in the quarter, a 14% decrease compared to 8.3 billion during the second quarter of 2019. This decrease was driven by the discontinuation of the fuel purchases operation that we did during the 2019. due to the new regulation that centralized the fuel purchase for all generators in CAMESA. This effect represented a 2.3 billion variation during the second quarter. Excluding this effect, revenues for the second quarter of 2020 were 7.2 billion compared to 6 billion in the second quarter of 2019. This increase was mainly driven by an increase in sales under contracts which amounted to 3 billion during the second quarter of 2020, as compared to 0.8 billion in the same period of the previous year, mainly due to the revenues related to Brigadel López Power Plant, which was acquired in June 2019, the new Luján de Cuyo Congeneración Unit, which started operations in October 2019, and the wind farms La Castellana II, La Generala II, Manje and Olivos, which started operations during June, September and December 2019. and February 2020 respectively. This increase was partially offset by a decrease in sales under the Energía Base Framework of 1.9 billion due to a decrease in prices for units under the Energía Base Regulatory Framework established by Resolution 31-2020 enforced since February 1, 2020. And the decrease in energy generation and thermal units availability mainly due to the failure in the main transformer of Mendoza combined cycle, as Jorge mentioned before. Going to page 7, we can see the changes in our EBITDA, which was around 7.6 billion in the second quarter of 2020, compared to 4.4 billion in the second quarter of 2019. This was due to, first, a 5% increase in our gross profit, as compared to the same period of 2019. This was due to the variation in revenues mentioned before and was partially improved by a 28% decrease in the cost of cells that total 3.4 billion compared to 4.7 billion pesos in the same period of 2019. The decrease in the cost of cell was primarily driven by a 79% decrease in the purchase of fuel and related costs to the continuation of these operations in this quarter according to the new regulation. This was partially offset by a 36% increase in non-fuel-related cost of production, mainly due to an increase in our installed capacity following the acquisition of the Aguilera-López plant and the COD of the new thermal and renewable energy plants. Gross profit margin totaled 53% during the second quarter as compared to 44% in the same period of 2019. This change was mainly a consequence of operation of purchase of self-supply fuel, which was enforced during 2019. Finally, other operating results net was 2.2 billion higher in the quarter, mainly due to the foreign exchange difference on operating assets, mainly driven by the central wealth obligato trade receivables due to a 9.3% percent depreciation of the Argentine pesos during the period as compared to a 2% appreciation during the same period of 2019, which was partially offset by an impairment in property, plants, and equipment due to evaluation of fair value of certain gas turbines that we held in storage. And going to page eight, the conservation income was 2.2 billion pesos, compared to 1.9 billion in the same period of 2019. In addition to the factors mentioned before, the net income was mainly affected by a higher financial expenses, which increased 4.3 billion due to the loans obtained for the thermal and renewable energy expansion project and the acquisition of the Brigadier López power plant. and the lower share of profit as associates mainly due to a weaker result from Ecogas. These effects were partially compensated by a favorable net monetary position during the quarter resulting in a gain in real terms while the situation was the opposite during the second quarter of 2019 and a 0.6 billion increase in financial income. Going to page 9, you can see our cash flow for the second quarter of 2020. Net cash provided by operating activities was 8.2 billion. This includes 1.3 billion in collection from CBO installments, which is not contained in the EBITDA. The cash flow from operations was partially offset by 3 billion capex invested in the expansion project and 4.2 billion used in financing activities. From recent news, on August 2020, CMB, the Argentine Security Regulator, approved a joint program for a domestic bond issuance, the commissions, by C.P. Manque and C.P. Olivos, two wholly owned subsidiaries of C.P. Renewal. for up to $80 million. This is the first step for the clinicians to get long-term financing for these projects. Thank you, and now we invite you to ask any questions to our team.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. The first question today comes from Frank McGann of Bank of America. Please go ahead.