Central Puerto S.A.

Good morning and welcome to the Central Puerto Conference call following the results announcement that the quarter ended on March 31st, 2021. All participants will be in a 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 IFRS and are stated in Argentinian pesos. Much otherwise noted, it is worth noting that the financial statements for the quarter ended on March 31, 2021, 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 security 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 to simplify the discussion. On the call for Central Puerto is Fernando Bonet, Chief Executive Officer, Enrique Turanel, Chief Financial Officer, Milagros Nande, Chief Financial Manager, and Nicolas Machi, Investor Relations Officer. And now I will turn the call over to Fernando Bonet. Mr. Bonet, thank you. You may begin.

Thank you very much. Good morning and welcome. It's a pleasure for me now as the CEO joining you today with our management team from Buenos Aires to report on the results of the first quarter 2021 and then answer any questions you may have. I would like to begin today's call analyzing the developments of the first quarter, comment on the progress of our expansion project, and analyze the operating figures of the quarter. Milagros will present the recent financial news and results. First of all, and going now to page 3, as you may recall, during 2020, the measures adopted to prevent the spread of the COVID-19 virus have an impact on the progress of our Project Terminal 6 new cogeneration unit. During the quarter, we have continued with the construction of the new Terminal 6 San Lorenzo Progeneration Plant, and reach a progress of 92%. It's important to remark that since November 2020, the plant obtained a partial commissioning of its gas turbine of 269 megawatts, selling energy under the spot market regulation. Once the COD of the full project is achieved, which is expected for the third quarter of 2021, the plant will be remunerated under a 15-year PPA on the energy side and sell steam to a private off-taker under also a 15-year contract. Moving now to our key performance indicator for the quarter, as you can see on page four, energy generation during the first quarter was 3,479 kilowatts hours of electricity, 11% lower than the same period of 2020. This was mainly due to a 306 GWh drop in generation from our Piedra de Laila hydro plant, related to a lower water inflows and 180 GWh decline in our thermal generation, mainly due to small failures in our puerto's combined cycle and some of our steam turbines partial upset by the generation from the new wind farms monkey and olivos and the general one renewable energy increased 60 56 sorry gigawatts compared to the same quarter of 2020. Steam production during the fourth quarter increased 3% due to a good availability and generation of our Luján de Cuyo cogeneration plant. Regarding the availability of thermal units during the first quarter of 2021, it reached 89% as compared to 93% during the same quarter of 2020. This was mainly due to small failures in our Puerto's combined cycle during March 2021 and some of the steam turbines of Puerto and Lujan de Cuyo plants. still this indicator remains significantly higher than market average availability for thermal units which was 81 percent for the same period according to data from canessa finally regarding to spot market tariff scheme is worth to mention that we have several calls and meetings with the sub-secretary of energy in which we discussed the necessity and the urgency to have an in this remuneration scheme, which was free since February 2020. And we are expecting to have news in this regard in the next weeks. And now I will turn the call over to Milagros, who will comment on the financial highlights.

Thank you, Fernando. I will start referring to some recent financial news for the company and then comment on the results of the first quarter of 2021. On February 25, the Central Bank decided to extend the ESX regulatory restrictions, established by the communication 7106 until December 31, 2021, through the issuance of the communication 7230. The installments under the syndicated loan signed with Citibank, Chaplin Morgan Chase Bank, and Morgan Stanley Senior Funding for the acquisition of the Gabriel Lopez thermal plant, maturing on June, September, and December 2021, are under the scope of such regulations. Therefore, as of the date of this press release, we are maintaining negotiations with this bank to reschedule those installments. Moving now to the results for this quarter, as you can see on page 5, our revenues were 10,164 million pesos as compared to 11,490 million pesos during the first quarter of 2020. This decrease was mainly due to a 31% decrease in spot-saves energy of ASE, which totaled 4,166 million in the first quarter of 2021, as compared to 6,050 million pesos in the first quarter of 2020, mainly due to the lack of monthly price adjustment of Resolution 31, instructed by the Secretary of Energy on April 8, 2020. and to a lesser extent, two small failures in Porto's combined cycle and some of its steam turbines. This was partially offset by a 13% increase in sales under contract, which amounted to 5,444 million pesos during the first quarter of 2021, as compared to 4,813 million pesos in the first quarter of 2020, mainly due to the new wind funds mentioned above. and 9% increase in steam sales, which totaled 281 million pesos in the first quarter of 2021, compared to 258 million pesos in the first quarter of 2020, as the steam production increased 3% in the quarter. The gross profit was 4,973 million pesos in the first quarter of 2021, compared to 6,686 million pesos in the first quarter of 2020. This decrease was due to the above-mentioned variation in revenue and a 10% increase in the cost of sales that totaled 5,191 million pesos compared to 4,734 million in the first quarter of 2020. This increase in the cost of sales was primarily driven by a 43% increase in purchases of materials and spare parts, which totaled 1,345 million pesos during the first quarter, as compared to 942 million pesos in the first quarter of 2020, and also a 6% increase in cost of productions. which totaled 4,052 million pesos in the first quarter of 2021, as compared to 3,806 million pesos in the first quarter of 2020, mainly due to the increase in depreciations of 349 million pesos and increase in maintenance expenses of 173 million pesos. Given the current scenario of no tariff adjustment for units under the energy policy framework, the company made a strong review on expenses. Therefore, administrative and selling expenses were reduced 11% in real terms, saving more than $100 million during the first quarter of 2021 as compared to the same period of 2020. Rough profit margin was 49% during the first quarter of 2021 as compared to 59% in the first quarter of 2020. Going to page six, we can see the changes in our VDA, which is 9,679 million in this quarter compared to 10,848 million pesos in the first quarter of 2020. In addition to the variation in gross profit mentioned, this was mainly due to a 17% decrease in foreign exchange difference on operating assets mainly related to foreign trade receivables that generated 2,862 million pesos gain during the first quarter of 2021 compared to 3,461 million pesos during the first quarter of 2020. It is worth mentioning that during 2020, Camisas has completed all scheduled payments of principal and interest in accordance with the PONI agreements for Termoeléctrica, José de San Martín and Termoeléctrica Manuel Belgrano. This was partially offset by a higher depreciation of the Argentine pesos, As a reference, during the first quarter of 2021, the Argentine peso depreciated 9.28% as compared to 7.77% during the first quarter of 2020. Variation of gross profit was also due to a 44 decrease in interest from clients with total 613 million pesos during the first quarter of 2021 compared that to 1,094 million pesos in the first quarter of 2020, mainly related to the total collection of the four new agreements for San Martín and Belgrano during 2020. All this was partially offset by an increase in depreciation and amortization that totaled 1,913 million pesos during the first quarter of 2021, as compared to 1,657 million during the first quarter of 2020. During this quarter, no impairment accounted compared to the 1,105 million pesos of the first quarter of 2020. Going to page seven, the consolidated main income was 640 million pesos compared to 1,364 million pesos in the same period of 2020. In addition to the factors mentioned before, the net income was positively impacted by a higher financial income, which amounted 422 million pesos during the first quarter of 2021, compared to 185 million pesos in the first quarter of 2020, and to lower income tax expenses that amounted in the first quarter of 2021 compared to $2,335 million in the first quarter of 2020. Also, the net income was negatively affected by higher financial expenses that amounted to $7,012 million in the first quarter of 2021 compared to 6,213 million pesos in the first quarter of 2020, mainly due to higher foreign exchange difference on loans, most of which are denominated in US dollars. Additionally, the share of profit of associates was 267 million pesos lost in the first quarter of 2021, compared to 77 million gained during the first quarter of 2020, mainly due to lower results of operations of ecogas due to lack of tax adjustments for the natural gas distribution businesses. Finally, the gain on the monetary position totaled 191 million pesos during the first quarter of 2021 as compared to 447 million pesos in the first quarter of 2020. Going to page eight, we can see our cash flow for the first quarter ending on March 2021. Net cash provided by operating activities was 4,021 million pesos. This included 1,109 million in collections from Vuelta a Oliva installment. Also, net cash provided by investing activities was 303 million pesos. Additionally, on the financing side, 4,429 million were used for banks and investment accounts overdraft payments for 1,171 million, long-term loans for 2,228 million pesos, and interest and other cost loans for 1,041 million pesos. 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 our roster. Our first question comes from the line of Frank McGann with Bank of America. You may proceed with your question.

Okay. Thank you very much. I wondered in terms of the legacy price adjustment that you said you've been discussing with the Secretary of Energy and others have suggested that as well. It sounds like you're fairly confident, I guess. I'm just wondering if you have any feel for how material that could be, how it might be structured, particularly, you know, in light of what we saw with the distribution increase that was Grant had recently just wondering, you know, if how much risk maybe there is associated with getting it. And then, secondly, just a couple, you know, more, you know, mundane things. Just in terms of the current hydro situation for Pueblo de Anaguila and the Puerto plant, the issue that you had with it, if you could provide a little bit more detail maybe and, you know, if those are completely resolved at this stage.

Okay, thank you, Frank, for your question. In terms of the tariff increase in Resolution 31, as you mentioned, and we talked in the call, we have several meetings since last year with the Sub-Secretary of Energy, Federico Basualdo, and we have, additionally, meetings with Daniel Martinez, which is the Secretary of Energy, In those meetings, we, as we mentioned, we discussed about the urgency and necessity of this adjustment. They really understand the situation. They agree with our situation. They want to move in the same, or try to move together the different increased, not taking one by one. They want to solve increases as a whole, and they work on the gas sector, they work on the electricity distribution sector information, and the last one is our increase. We talk with them in order to establish the resolution 31, which in fact establish a mechanism to make the adjustment, establish a mechanism which is related to the inflation, And we think that they believe that this perhaps is not, or perhaps it's not the automatic way that they're not so, or they're not planned to make that automatic, which is establishing the resolution. They are thinking more in an adjustment in the old days that you receive an adjustment once a year in order to cover the inflation. And I think this is the only thing that is pending is to cut the final number and to establish when it's gonna apply. We talked with them in order to establish a retroactive effect from February. And I think they're willing to accept that, to establish this new But we don't have the final number yet. Of course we are, in the case of degeneration, the interesting thing is that an increase of 30%, to say so, in degeneration. in terms of Resolution 31, the impact on the tariff, the final tariff is very, very small, less than 1.5%. So I think there is no restrictions to do it. They want to, as I mentioned, they want to move in line with the first, solve the distribution and gas issues, and then start working on closing the Resolution 31 increase. We are confident that they're going to move forward in that way to perform an increase, recover at least part of inflation that we suffered. But we don't know yet the final number. We don't have the final number coming from them. Perhaps you have different information coming from the news, but we don't have the final number coming from them. They ask for... They asked for calculations surrounding 29% increase, making numbers around that, but we don't have the formal confirmation that this will be the number yet. So this is the information that we have until now. And in terms of the other question, which is The situation is more or less the same as the last year. We have a dry period in the influx, in the water influx. We have less water influx than the normal, the media of the last 15, 20 years. We are having very dry years in Piedra y Lareda, so this explains why the the production or the generation is less than in the past. We don't know yet it's attendance. We still think that it's dry period only, but we are analyzing with the specialists what perhaps the next year will bring in terms of of inflows, water inflows, but it's only that. We don't suffer any problem in the turbines. We don't suffer any restraints or constraints in terms of lines. This patch is only about water inflows. And in the case of Central Puerto, as you asked additionally, in the case of Central Puerto, we suffer different small failures in our combined cycle here in Buenos Aires. All of these failures are, as I mentioned, small problems related to pumps, related to the boiler, some failures in the boiler, but nothing that are extremely important and takes a few days in order to come back online. And that was what we suffered that reduction in production and import. It's not related to the dispatch. The combined cycle is very efficient. So every time that is available, the combined cycle is on dispatch. But we suffered, as I mentioned, several small failures during the first quarter. Right now, the combined cycle is operating normally without any problem. So we don't think that these small failures will be happening again in the near future.

Okay, great. Can I just follow up? Yeah, you mentioned that an estimate that a 30% increase in the legacy tariffs would be what percentage to the legacy price would be what percentage of the final tariff? 1.5, you think you said?

No, no, no, no, no. This is the impact that if they apply. We don't know the number yet, as I mentioned. As you perhaps listened some news on the press, and as I mentioned, the Secretary of Energy had calculations to Camisa regarding the 29% increase, 29. But I mentioned that this 29, if they apply this 29, The impact on the final tariff is very small. It's less than 1.5%. That's what I mean.

Okay. Yeah, that's what I wanted. Okay. Thank you very much. You're welcome.

If you would like to ask a question, please press star then 1 on your telephone keypad. Our next question comes from the line of Ramon Rosilores With the launch capital, you may proceed with your question.

Hi, everyone. Thank you for taking my question. I would like to ask you about a terminal fix. You mentioned that you have reached 92% completion. So what's the remaining capex for this? And then another question, are you planning to tap the market during 2021? Thank you.

Thank you for your question. Yes, we are at 92%. The remaining capex is, for Terminal 6, the remaining capex is around $15 million. And in the second question, we are not, right now, we are not thinking to go back to the market in 2021 because we do not have any additional capex in this year. And we are restructuring our debt, our short term debt because the resolution of the central bank, but we are restructuring in fact. So we don't think by now, of course, perhaps some opportunities may appear, but we are not seeing right now going to the market.

So do you have any updates on the syndicate negotiation?

Yes, we are discussing the extension regarding to the 60% of the last three installments, and we are in the process with the banks. We are not, these projects are not closed, but we have several advances, yes.

Okay, thank you very much.

You're very welcome.

Our next question comes from the line of Alan Roth. You may proceed with your question.

Hello. Thanks, everyone. My question is two questions mainly regarding the Resolution 3120. The first thing is, is there a strategy in discussion? Is it going to be like an increase to the fixed price for another term, or can it be like a variable price? And then the second thing is, is there any deadline? Because you said we don't have any information from the parties. Is there like a timeframe that they have to provide us either yes or no? There could be an increase in the price or definitely no for a deadline. If there's any update, do I see or where would we see that? Would it be on the news on the website as a news posting? And that's it. Thanks.

Okay. Thank you for your question. As we have been talking with them and as we see the things going on, we don't see a new scheme. We see an increase on that fixed price. at least for this next month, I think. That will be the new opening of discussion about the new increase. It will depend on the inflation, but I see, as I mentioned, a new fixed price for a period of time. I don't know for how many months, but that will be depending on the inflation, how it's going on. If we have a higher inflation, I think we need to discuss a new increase. But we need a new resolution. In the past, all these increases in the resolution or in the SPOT scheme came by the resolution of the Secretary of Energy. It's not like an automatic increase. So as we see the situation right now, this increase will be for a period. I don't know for how many months, but that will be depending on the inflation, how it's going on. If inflation gets smooth, smoother than now, which is higher, perhaps we maintain this increase for perhaps until the elections. And then if the inflation goes up, we need to discuss new adjustments. So we'll request that at least. And I think the other question was how we're going to present that increase. I think we'll be public because it's a resolution, but we can also express something on our website. Website also, yes, or a piece and perhaps on a relevant release or press release, yes, when it happens.

Okay, thank you very much. You're welcome.

This concludes our question and answer session. I would like to turn this conference back over to Mr. Bonette for closing remarks.

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

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