Central Puerto S.A.

Good morning and welcome to the Central Puerto Conference call following the results announcement for the quarter ended on September 30, 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 through 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 IFRS. and are stated in Argentinian pesos unless otherwise noted. It is worth noting that the financial statements for the quarter ended on September 30, 2020, include the effects of the inflation adjustment. Accordingly, the financial figures mentioned during the call, including the data from previous periods and the growth comparisons, have been stated in terms of Argentine pesos of the end of the reporting period. Also, please note that certain statements made by the company during this conference call are forward-looking statements, and we refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. Central Puerto assumes no obligation to update forward-looking statements, except as required under applicable securities laws. To follow the 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 today from Central Puerto is Jorge Rauber, Chief Executive Officer, Fernando Bonet, Chief Operating Officer, Milagros Grande, Financial Manager, and Tomas Darlian, Investor Relations Officer. I will now turn the call over to Jorge Rauber. Mr. Rauber, you may begin.

Thank you very much. Good morning and welcome. I would like to begin today called Analyzing the Developments of the Third Quarter, Comment on the Progress of our Expansion Projects, and Analyze the Operating Figures of the Quarter. Fernando will present the recent financial news and results of the quarter, and finally, will answer any questions that you may have. As you know, the COVID-19 crisis has affected almost all the world, and among other consequences, the electric energy demand in Argentina. However, during the third quarter, we have seen some degree of recovery thanks to the partial flexibilization of the quarantine. As you can see on page three, electricity demand decreased just 2.2% during the third quarter of 2020 as compared to the same period of 2019. As a reference, during the second quarter of 2020, electricity demand decreased 5.5% as compared to the same period of the prior year. We believe that this trend may consolidate in the future quarters. Nonetheless, as you may recall, it is worth noting that the decrease has a less refrigeration companies. In the case of renewable energy units they are unaffected since they have this patch priority so they can sell all the electricity that they generate. In the case of thermal units they have a high proportion of their income associated a fixed power remuneration which is not related to the energy production of the unit. Finally when demand decreases The units that stop generating electricity first tend to be the older inefficient ones, which are remunerated under the energy of asset framework as compared to the new efficient ones that have a higher remuneration through contracts, also known as power purchase agreement or PPAs. 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 project and the construction of the Lakenoveva 1 wind farm and Terminal 6 new cogeneration unit. Regarding Lakenoveva 1, we are pleased to announce that as of today, we have 20 of the wind miles in operation, and we expect to reach the commercial operation date, or COD, for the complete project through this month. Once the COD is reached, this plant will be remunerated and the 20-year PPA entered into with Commission. This will be the seventh wind farm that we commissioned since 2016, reaching a total installed capacity of 374 megawatt of wind power. During the quarter, we have continued with the construction of the new Terminal 6 San Lorenzo cogeneration plant. For this month, we expect to achieve the partial commissioning of the 284 MW gas turbine in an open cycle configuration for operation with natural gas, an important milestone for the project, which will allow us to sell energy under the spot market regulation. Once the COD for the full project is achieved, which is expected for the first half of 2021, the plant will be remunerated and in a 15-year PPA on the energy side and also sell steam to a private off-taker under another 15-year contract. Going now to our key performer indicators for the quarter, as you can see on page five, energy generation during the third quarter was 3.9 terawatt hours of electricity, 1% lower than the same period of 2019. This was to a large extent due to the 21 drop in generation from our piedra de lag the hydro plan related to lower water availability and was partially upset by the duration from the new wind farms, La Castellana II, La Genoveva II, Mancha and Los Olivos and the new Lujan de Cuyo cogeneration unit. Steam production during the third quarter of 2020, which was generated by the new Lujan de Cuyo generation unit, reached its expected capacity. During the third quarter of 2019, the steam production had a decrease due to schedule health of the old generation unit of the Lujan de Cuyo plant in order to allow the necessary civil works in the steam pipeline for the connection of the dual generation plant. which started operations in October 5, 2019. Therefore, due to this effect, the output of the third quarter of 2020 was 31% higher than the third quarter of 2019, reaching normal levels. Regarding the availability of our thermal units during the third quarter of 2020, it reached 89% as compared to 94% during the third quarter of 2019. It was mainly because of the failure of branded combine cycle of the Lujan de Cuyo plant occurred in April 12, 2020, which returned to service on July 16, 2020, and to a lesser extent to smaller revents in some of the steam turbines of the Puerto and Lujan de Cuyo plants. Still, this indicator remains higher than market average availability for thermal units, which was 84% according to data from Chemesa. Now, I will turn the call over to Fernando, who will comment on the financial highlights.

Thank you, Jorge. I will first refer to some of recent financial news for the company and then comment on the results of the third quarter of 2020. As you can see on page six, on August 31, our subsidiary C.P. Manque and C.P. Los Olivos issued two green bonds in the local security market for the equivalent of 50 million US dollars, replacing outstanding bridge loans with Central Puerto. The placement consists in a dollar-linked series, Class I, integrated in Argentine pesos for 35 million dollars with a maturity of three years, and a series in Argentine pesos with a maturity of one year for the equivalent of 15 million U.S. dollars. The issue was recognized by FIGS Rating, an affiliate of FIGS Rating, with the Green Bond Rating BB1. and the bonds were included in the panel of Social Green and Sustainable Bonds at Buenos Aires Security Market , being the first one to be included in this panel with the issuance. This is an important milestone for the company and the Argentine security market and we look forward to continue with the development of this kind of investment alternatives for which we expect a growth in demand. Going now to the results for the quarter, as you can see on page seven, our revenues were 9.1 billion as compared to 10.6 billion during the third quarter of 2018. This decrease was driven by the discontinuation of the fuel purchases operations that we did during 2019 due to the new regulations that centralized the fuel purchases for all generators in CAMESA. This effect represents a $1.7 billion variation during the quarter compared to the same period of the prior year. Excluding this effect, revenues were $8.9 billion compared to $8.7 billion in the third quarter of 2019. This increase was mainly driven by an increase in sales under contracts, which amounted to $4.3 billion during the third quarter of 2020, as compared to $3.5 billion in the same period of the previous year, mainly due to the new Luján de Cuyo cogeneration unit, which started operations in October 2019, and the wind farms Castellana II, La Genoveva II, Manque, and Los Olivos, which start operation during June, September, December 2019, and February 2020, respectively. And two, an increase in the steam cells that during the quarter total 330 million from the new Lujan de Cuyo regeneration plant compared to $98 million in the third quarter of 2019. This increase was partially offset by the decrease in sales under the energy of asset framework of $1 billion, mainly driven by a decrease in prices established by the Resolution 31, enforced since February 1, 2020. And the suspension of the monthly price adjustment PROCEDURE OF SUCH RESOLUTION INSTRUCTED BY THE ENERGY SECRETARY ON APRIL 8, 2020. THE GROSS PROFIT WAS $5.5 BILLION DURING THE THIRD QUARTER OF 2020 AS COMPARED TO $6.3 BILLION IN THE SAME PERIOD OF 2019. THIS WAS DUE TO A VARIATION IN REVENUES MENTIONED BEFORE AND WAS PARTIALLY UPSET BY A 13% REDUCTION IN COST OF SELL. that totaled 3.6 billion compared to 4.4 billion pesos in the same period of 2019. The decrease in the cost of sales was primarily driven by a 56% decrease in the purchase of fuel and related concepts due to the continuation of this operation according to the new regulations. Given the current scenario, no tariff adjustment for units under the energy of asset framework, the company made a strong review in order to maintain non-fuel related cost of production as low as possible. As a consequence, administrative and selling expenses were reduced in 26% in real terms. saving more than $208 million during the third quarter of 2020 as compared to the same period of 2019. Cross-profit margin total 60% during the quarter as compared to 59% in the same period of 2019. Going to page eight, we can see the changes in our EBITDA. which was around 7.7 billion in the third quarter of 2020, compared to 19.3 billion in the third quarter of 2019. In addition to the variation in gross profit mentioned before, this was due to a reduction of 11.3 billion in other operating results, mainly due to a reduction in foreign exchange different gain mainly related to the dollar-denominated funny trade receivables that generate a $1 billion gain during the third quarter of 2020, compared to $8.5 billion during the third quarter of 2018, when the Argentine peso registered a depreciation of 36%, mainly related to the outcome of the primary elections in 2019. And 4.8 million in a one-time in-interest register in the third quarter of 2019, associated with 2013 to 2016 Camestatrade receivables cancellation. Going to page 9, the consolidated net income was 2.3 billion pesos compared to 4.8 billion in the same period of 2019. In addition to the factors mentioned before, the net income was negatively affected by lower financial income, which decreased $270 million due to a lower foreign exchange difference on financial assets denominated in U.S. dollars, partially compensated by a higher market-to-market gain and a positively impact by lower financial expenses that decreased $8.8 billion in the third quarter of 2020. as compared to the same period of 2019, mainly due to a lower financial exchange difference on loans, most of which are denominated in U.S. dollars. Additionally, the results on net monetary position was $300 million in the third quarter of 2020, compared to $1.1 billion in the third quarter of 2019. Finally, the share of profit of associates was $486 million lower during the third quarter of 2020 as compared to 2019, mainly due to lower results from the operation of natural gas distribution associates related to a lack of tariff adjustment for the natural gas distribution business in 2020. Going to page 10, you can see our cash flow for the nine-month period ended on September 2020. Net cash provided by operating activities was $12.8 billion. This includes $4.6 billion in collection from FRONI and CBO installments. The cash flow for operations was partially offset by $8.5 billion CAPEX disbursement for the expansion projects. and 4.1 billion used in short-term investments. Additionally, on the financial side, 5.6 billion were used for principal and interest debt services, which was partially offset by 3.7 billion in new loans received during the period, mainly related to the green bond issues mentioned before. Thank you, and now we invite you to ask any question to our team.

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. Our first question today comes from Frank McGann with Bank of America.

Thank you and good day. Two questions if I could. One, I was just wondering if you could speak about the trend you're seeing in the third quarter in terms of demand, especially, not so much demand, but your actual generation, especially related to hydro and hydro conditions and how you were seeing those for the fourth quarter. And secondly, I was just wondering if you'd comment on how the cash flow payments are in terms of timing coming from Kamesa currently?

Well, I think, Frank, the first thing I want to mention is that demand is still one of last year. It's mainly driven, I mean, this decrease is compensated by a strong increase in terms of residential demand. The customers are consuming ten percent above the level they had last year, and what is affected is industrial and commercial demand in the same extent. Regarding what we are seeing is a very dry hydrology this year. In fact, we had a generation which is 21 percent below the normal level for our regular hydro power plant. The situation is more in terms of demand. We are seeing some progress and it's kind of covering us with the flexibilization of the quarantine, but it's still the level we had last year. For sure, we expect as the changes, I mean, the government introduced in terms of regulation now to kind of flex quarantine now, some increase, but the fact will, I mean, still be there for a couple of months at least.

Let me answer the second one. In terms of payment, Camisa is after they can increase or the government, the Secretary of Energy can increase the budget or the subsidies in terms of energy. The payment flow, we have a reduction in days of delay. We have previous increase in budget. We have around 40 days of delay, and right now we are in 30 days of delay in payment. So the payments are starting. Of course, we still have that 30 days of delay, but we are better than one month or two months ago. And the government says that we want to maintain that, not increase that quantity of days of delay. We are receiving more money, more flow, and I think with that we can still continue with this delay until the end of the year. can make the adjustment that they are saying happened in 2021.

Okay, thank you very much.

And again, if you have a question, please press star, then one. Our next question comes from Matthias Wesenach with Aaron Mira.

Hi, this is Matias from AR Partners. Thank you for taking this question. I have two, in fact. The first one is, how efficient do you expect T6 to be as an open cycle? Do you expect it to have a high dispatch factor? And the second one is, if you give us more color on capital expenditures in the remaining of this year and 2021. Thank you.

Well, I will answer the first question for sure. In the operation in open site, we expect a very low dispatch. Demand is slow now because of the coronavirus crisis and the demand and the offer we have on the renewable side. So we expect a very low dispatch, but as was mentioned, most of the remuneration of the units are based on availability, not on dispatch. So this unit operating in open cycle will contribute with a capacity payment until the command cycle is expected to occur during the first half of next year. And I will let Fernando answer the second one.

In terms of CAPEX, the only reminder we have already under construction are Terminal 6, as Jorge mentioned. There we have for the last 2020, $57 million in CAPEX, and the remaining portion of the CAPEX for the first quarter of 2021 are expected to be $22 million. In terms of the renewables, the last one we have under construction is Genoveva 1. which is starting this month, and for the last quarter of this year, we have $50 million. I think a portion of that is around $6 million. These are for expansion, and the normal ones that we have in terms of maintenance are around $15 million per year.

Thank you.

You're welcome.

This concludes our question and answer session. I would like to turn the call back over to Mr. Robert for any closing remarks.

Okay, thank you to everyone for your interest in Central Port. We encourage you to call us for any information that you may need. Have a great day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.