Central Puerto S.A.

Good morning and welcome to the Central Puerto conference call following the results announcement for the third quarter ended on September 30th, 2021. 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 that 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 are stated in Argentinian pesos, unless otherwise noted. It is worth noting that financial statements for the third quarter ended on September 30, 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 at the end of the reporting period. Also, please note that certain statements made by the company during the conference call are forward-looking statements and we refer to you to the forward-looking statements section of our earnings release and recent filings with the SEC. Central Pareto 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 to simplify the discussion. On the call today from Central Puerto is Fernando Bonet, Chief Executive Officer, Enrique Terranillo, Chief Financial Officer, Melagros Grande, Financial Manager, and Nicholas McKee, Investor Relations Officer. And now I'll turn the call over to Fernando Bonet. Mr. Bonet, you may begin.

Thank you very much. Good morning and welcome. We are joining you today with our management team from Buenos Aires, Argentina to report on the results of the third quarter 2021 and then answer any questions you may have. I would like to begin today's call by analyzing the recent events, comment on the progress of our expansion project, and analyze the operating figures of the quarter. Milagros will present the latest financial news and results. First of all, I want to highlight the new Resolution No. 1037 of 2021, which was published in the Official Gazette on November 2, 2021. The Secretary of Energy, upon verifying the state of high energy supply required by Brazil due to the drought in the area, created an export account where the income margin for the electricity energy export operations will be accumulated. and will be applied in the financing of the energy infrastructure projects. In addition, this resolution established an additional and transitory remuneration for the spot generating agents included in Resolution 440 that will cover economic transactions between September 1, 2021 and February 28, 2022. The amount of this additional remuneration will be defined by the Secretary of Energy through a future regulatory instruction not published yet. Now going to page three, I would like to talk about Terminal 6 San Lorenzo cogeneration plan, the latest project in Central Puerto's expansion plan. On August 15, 2021, we finally reached the commercial operation of the Terminal 6 steam turbine commencing operation as a combined cycle and started the cell energy under the PPA signed with Kamesa. Additionally, after the fine tuning of the steam pipe, the steam supply contract starts on October 31 of 2021. Due to a strong impact of COVID-19 and the related restrictions, we suffer a delay of 53 days in reaching the commercial operation date set in the PPA. On August 23, 2021, Kamesa informed that a penalty of $4.4 million would apply for the delay of the 53 days. The company rejected and sent all the evidence of the COVID-19 extraordinary impact to the Secretary of Energy and Kamesa to reverse such penalty. With this new power plant finished since 2018, we successfully accomplished the construction of two cogeneration plants of 484 megawatts of thermal energy and seven wind farms of 374 megawatts of renewable energy, with an investment over 900 million U.S. dollars. Another important development to highlight is that Central Puerto published its third sustainability report, where the economic, social, and environmental management and actions taken during 2020 are described. Now I would like to comment on the latest development Development in the industry, as you can see on page 4 and 5, in terms of installed capacity, the system reached 42.589 MW in the third quarter of 2021, resulting in a 3% increase compared to the third quarter of 2020. based in the new thermal units which rise 2% and the renewal projects that grew 25%. Our plants, Terminal 6 and Genoveva 1 wind farm, are part of the new capacity which commenced operations in this period. As of September 30, 2021, the installed capacity is divided in 59% thermal and 25% hydro, 4% nuclear and 11% renewable. In third quarter of 2021, energy generation increased 11% to 37.058 GWh compared to the third quarter of 2020. mainly due to a 24% increase in thermal, a 17% increase in nuclear, and a 40% increase in renewables, partially offset by a decrease of 33% in hydro. Overall improvement was due to a higher demand and more exports. Thermal and renewable rise was due to a new capacity installed. In contrast, the drop in the hydro's generation is related to the droughts that the region has experienced in the past month and consequently the river's lower flows. During the third quarter of 2021, the main source of energy generation continued to be the thermal and hydro, with the share of 64% and 15% respectively. Meanwhile, renewables keep growing and represent 12%, three points more than the third quarter of 2020. Finally, on page five, energy demand increased 5% up to 34.446 Gia Guadalajara compared to the third quarter were great demand residential and commercial rise 16% and commercial growth 4%. This was partially offset by 1% decrease in the residential. The increase in commercial and great demand segment in the third quarter of 2021 is attributed to a recovery of the economy, activity, and lower restrictions imposed by government compared to the same period of the previous year. All three months of the quarter show comparative increases. As of the third quarter of 2021, and regarding the demand structure, 47 is represented by residential users 26% by commercial activity, and the remaining 27% is related to the great demand, residential and commercial. Going now to our key performance indicator for the quarter, as you can see on page six, energy generation during the third quarter of 2021 was 3.44 GWh of electricity 12% lower than the same period of 2020. The decrease was mainly caused by a 582 GWh drop in the hydro generation from Piedra del Águila due to a lower water inflows in the Limay and Cochoncura rivers. This was partially upset by 107 GWh rise in the energy generation from renewable units, primarily as a result of Kenoveva 1 full operation and 13 GWh increase in the thermal production mainly due because Terminal 6 starts operation. Steam production during the third quarter increased 4% due to a good performance of Lujan de Cuxo Concentration Plan. Regarding the availability of our thermal units during the third quarter of 2021, it reached 90%, in line with the strong availability history of Central Puerto equipment, and shows an improvement from the 89% of the third quarter of 2020. As a reference, the market average availability for thermal units for the third quarter of 2021 was 82%, according to data from CAMESA. 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 for the third quarter of 2021. On September 3rd, 2021, Vientos La Genova 2 and CPR Energy Solutions, both subsidiaries of Central Puerto, met all requirements and conditions established in the financial documents for the project's completion. As a result, the corporate guarantee granted by Central Puerto to each project was released. Going now to the result of this quarter, as you can see on page 8, our revenues were reduced 13.3 billion pesos as compared to 13.8 billion during the third quarter of 2020. This 4% decrease was mainly due to a 6% decrease in sales under contracts, which totaled 6.3 billion pesos in the third quarter of 2021 as compared to 6.6 billion in the third quarter of 2020. This was due to a higher inflation adjustment over the peso depreciation for the same period, and despite the higher generation produced by Terminal 6 and Genoveva 1. Also, an 8% drop in steam sales, which totaled $0.5 billion in the third quarter of 2021 compared to the same period of 2020, also due to inflation versus depreciation variations, and despite the production's increase. Going to page 9, we can see changes in our VDA, excluding impairment and phony effects difference and interest, which was 6.5 billion pesos in the third quarter of 2021 compared to 9.6 billion pesos in the third quarter of 2020. This decrease was due to a 27% or 1.4 billion pesos increase in the cost of sales, and 25% or 0.2 billion pesos raised in the administrative and selling expenses. The increase in cost of sales was primarily driven by a 45% or 0.6 billion increase in purchases of materials and spare parts, and a 20% or 0.9 billion increase in cost of production, mainly due to an increase in depreciation are rising fees and compensation services, and more materials and spare parts. In other results, we can mention 38% decrease in foreign exchange difference on operating assets, mainly related to trade receivables due to a lower depreciation of the Argentine peso in the quarter and lower trade receivable balances, and also the negative result of 1.2 billion pesos for provision charges which also impacted the adjusted EBITDA. Going to page 10, the consolidated net income was 2.7 billion pesos compared to a consolidated net income of 3.5 billion in the same period of 2020. In addition to the factor mentioned before, the net income was affected by lower financial income that amounted 0.3 billion pesos in the third quarter of 2021 compared to 1.4 billion pesos in the third quarter of 2020, mainly due to 1.2 billion pesos reduction of net gains on financial assets at fair value. Net income was also positively impacted by lower financial expenses, which amounted to 0.1 during the third quarter of 2021 compared to 6.7 billion in the third quarter of 2020. Afterward, less foreign exchange difference, which decreased 3.9 billion pesos, mainly due to lower depreciation of Argentine peso during the quarter and lower dollar-denominated debt balance. Funny collections totaled 3.2 billion pesos in the third quarter of 2021, including VAT associated to the furniture receivables for Vuelta Obligado power plant, compared to $2.1 billion of third quarter of 2020. The amounts are being collected on time and according to the signed contract. Going to page 11, you can see our cash flow for non-month of 2021. Net cash provided by operating activities was 16.8 billion pesos. This included 3.2 billion pesos in collection from Vuelta al Obligado installments. Net cash used by investing activities was 4.3 billion pesos, mainly due to the construction of Terminal 6, lost from the sale of the short-term financial assets, partially offset by the sale of property, plant, and equipment. Additionally, on the financing side, 12.6 billion pesos were used for payment of loan for 8.7 billion pesos, and interest and other loan costs for 3.5 billion pesos. Thank you. And now we invite you to ask any question to our team.

We will now begin with the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star, then two. At this time, we will pause momentarily to assemble our roster. Your first question is coming from Martin Aronset from Balance Capital. Your line is live.

Hi. Martin Aronset here from Balance Capital. First of all, thank you for the materials, as always. I have two questions, if I may. Do you have any projects on site going forward, given your cash generation from now on? And my second question is, we have been seeing in recent earnings polls an improvement in commercial payments. What do you see on that area going forward?

Okay. Thank you. Thank you for your question and your interest. First of all, after having finished Terminal 6, in fact, we are having some additional or closing CAPEX from Terminal 6, or remaining CAPEX, so we expect to finish the project completely during this month. Apart from that, we are analyzing different alternatives. One of them is the close of the combined cycle of Brigada-López. and we are analyzing that we are analyzing the financing opportunities for that and we are analyzing the evolution of the of the kobe 19 issue in order to have more clear path to start a new construction project as you as you know the the the problems during the construction of terminal six regarding the kobe not only the the illness in fact the restriction that the government established bring a lot of cost and difficulties in the construction. So we are analyzing all of these and we have projects on the pipeline, as I mentioned, perhaps the first one is the closing of the combined cycle of Rio de Lopez. And apart from that, we are expecting, as I mentioned, how the COVID issue follows, how the financial possibilities in the market came. And then we'll see additional projects. Renewables also requires increase in the grid. In Argentina, there is no much more capacity on the grid to install new capacity of renewables. So we are analyzing different options, but we don't have any confirmed yet. So we expect in the next month, after the elections, after the COVID-19 issue is more clear, we will have more we can clarify more of how the new projects will come. But as I mentioned, we have a pipeline there, but we need to wait until we have more clarity about those issues. The next question is regarding the payments, the CAMESA payments. We see, as you mentioned, we see a reduction in the delay. In fact, we are nowadays in 20, 25 days of delay. We came from 40, 35, 40 days of delay in the previous month. So we reduced, we see a reduction there. Now they need to increase the budget for the subsidies that the Treasury sent to CAMESA. So perhaps we need to wait until when they can increase that budget in order to have more, we can clarify if we can maintain those reductions or those days of delay or we'll see some increase. These are the good news of what we are seeing is that it's coming to our export in energy to Brazil. So they have an inflow of money there. Because of that, they established this new regulation about that, how they can use that money. But we need to wait until, as I mentioned, until the Treasury increases the budget for the subsidies that are sent to committees in order to have more money. more color about the delays. But we are confident that we can maintain these delays between 25 and 30 days of delay. We are seeing them.

Okay. One follow-up question, if I may. Those renewal projects that you are considering, will those be under matter?

Yes, yes, yes. We are analyzing. They are not big ones because there are some limitations in terms of, as I mentioned, the capacity, the grid capacity. So I see some expansion of the project that we already have, small expansions to serve private contracts.

Okay, thank you very much.

Okay, thank you.

Thank you. Again, if you have a question, please press star, then 1. This concludes our question and answer session. I would like to turn the conference back over to Mr. Bonet for any closing remarks.

Thank you to 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.

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