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Central Puerto S.A. American Depositary Shares (each represents ten Common Shares)
Q1 2022 Earnings Conference Call
5/13/2022
spk00: Good morning and welcome to the Central Puerto conference call following the results announcement for the first quarter ended on March 31st, 2022. 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 the IFRS and are stated in Argentinian pesos. unless otherwise noted. It's worth noting that the financial statements for the first quarter ended on March 31, 2022, include the effects of the inflation adjustments. 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 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 law. 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, Enrico Terraneo, Chief Financial Officer, and Milagros Grande, Financial Manager. And now, I will turn the call over to Fernando Bonet. Mr. Bonet, you may begin.
spk03: Thank you very much. Good morning and welcome. We are joining you today with our management team from Buenos Aires, Argentina to report results for the first quarter 2022. After the presentation, we will answer any question you may have. I would like to begin today's call by analyzing the recent events, the industry in general, and finally the operating figures of the first quarter 2022. Milagros will present the most recent financial news and results. First, I would like to comment on the latest regulatory news in the industry. On April 21, the Secretary of Energy issued the Resolution 238-2022, which updates remuneration prices for energy and capacity of units under energy-advanced regulatory framework. Remuneration values increased by 30% retroactively to February 2022, An additional 10% increase will become effective in June 2022. This resolution also eliminates the use factor adjustment that reduced the capacity payment calculation for the units with lower dispatch. In our steam turbines with low dispatch, this change implies an improvement of approximately 30% in their capacity payments. now i would like to comment on the main metrics of the industry as you can see on page four in terms of stone capacity the system reached 42 871 megawatts in the first quarter 2022 resulting in a 1.4 percent increase compared to the first quarter of 2021 mainly based in a new renewable project developed As of March 31, 2022, the installed capacity continued to be 59% thermal, 25% hydro, 12% renewables, and 4% nuclear. In the first quarter of 2022, energy generation increased 1% to 35,719 GWh, compared to 35,000 GWh in the first quarter of 2021, mainly due to a 37% increase in nuclear, 24% increase in renewables, and 2% increase in thermal, partially offset by a decrease of 25% in hydro. Renewables rise was due to a new installed capacity and nuclear is due to a higher ATUCA1 and ATUCA2 availability. For thermal units, there was an overall lower availability, 76% for the first quarter of 2022, as compared to 81% in the first quarter of 2021. During the first quarter of 2022, main sources of energy generation continued to be thermal with a 65% share and hydro and renewables represented 13.9% and 13.6% respectively, while nuclear was 7.3%. Finally, as you can see on page 5, energy demand increased 4.3% up to 34,520 GWh compared to 33,087 GWh in the first quarter of 2021, where commercial users grew 7%, residential grew 5%, rate users grew 4%, and industry keeps the same level at the first quarter of 2021. Rises in different demand segments in the first quarter of 2022 were related to the recovery of the economy activity and lower COVID-related restrictions. As of first quarter of 2022, demand structure is 45% represented by residential users, 29% by commercial activity, and the remaining 26% is related to industrial and commercial-grade demand. Going now to our key performance indicator for the quarter, as you can see on page 5, energy generation during the first quarter of 2022 was 4,585 GWh of electricity, 32% higher than the same period of 2021. The increase was mainly caused by 36% increase in energy generation for thermal sources Specifically, Terminal 6 and Lorenzo Power Plant full operation as combined cycle, and higher dispatch of Central Puerto steam turbines due to a higher demand, partially offset by certain unavailability of Lujan de Cuyo cogeneration. And 26% increase in Piedra El Águila due to CAMESA's decision to increase dispatch regardless the low water inflows, reducing the dam level. Steam production during the first quarter of 2021 increased 76% totaling 461,000 tons produced due to the Terminal 6 San Lorenzo power plant full operation and good performance of Lujan de Cuyo cogeneration plant. Regarding the availability of our thermal units during the first quarter of 2022, of which 84%, in line with the strong availability history of Central Puerto's equipment. As a reference, the market average availability for thermal units for the first quarter of 2022 was 76%, according to data from CAMESA. And now I will turn the call over to Milagros, who will comment on the financial highlights.
spk02: Thank you, Fernando. First, I would like to comment on certain key financial information related to the Brigadier López Financial Trust. On April 5, 2022, the existing financial debt under the Brigadier López Financial Trust that was acquired together with the power plant was cancelled. As of December 2021, the amounts due on this Trust were $32 million. This financial debt accrued interest at an annual rate equal to the rate of LIBOR Plus 5, or 6.25%. The scheduled final maturity of this indebtedness was August 2022, but was cancelled in April as a policy of liability management reducing financial costs. I now will comment on the results of the first quarter of 2022. Going now to the results for this quarter as you can see on page 7, our revenues were 17.2 billion pesos as compared to 15.8 billion during the first quarter of 2021. This 8.8% increase was mainly due to an 8% increase in energía base sales, which totaled 7 billion pesos as compared to 6.5 billion pesos in the first quarter of 2021, because of a 19% increase in generation and a rise of 30% in tariffs under the new resolution 238 of 2022, which is lower than inflation that reached 55.1% in the last 12 months. Also, there was a 7% increase in sales under contracts, which totaled 9 billion pesos in the first quarter of 2022 as compared to 8.4 billion pesos in the first quarter of 2021, mainly due to the full COD of Terminal 6 San Lorenzo power plant, which represented an increase in generation of 523 GWh as compared to 35 GWh in the first quarter of 2021. And finally, a 93% increase in steam sales, which totaled 0.8 million pesos in the first quarter of 2022, representing a 76% increase in steam production, compared to 0.4 billion pesos from the same period of 2021. Going now to page 8, we can see the changes in our EVDA, excluding impairment and phony effects difference and interest, which was 12.9 billion pesos. in the first quarter of 2022 compared to 10.2 billion pesos in the first quarter of 2021. This 27% increase was driven by the following changes. A 9% increase in revenues explained before, a 6% decrease in cost of sales that totaled 7.6 billion pesos in the first quarter of 2022 as compared to 7.99 billion pesos in the first quarter of 2029 mainly due to lower operational costs. A 19% decrease in administrative outstanding expenses that totaled 1 billion pesos during the first quarter of 2022 as compared to 1.2 billion in the first quarter of 2021. And finally, to a 22% other operating results that totaled 4.4 billion pesos during the first quarter of 2022 compared to 5.6 mainly due to the insurance recovery related to Lujan de Cuyo and Manga sites. On page 9, we can see the consolidated net income that was 4.8 billion pesos compared to consolidated net income of 1 billion pesos in the same period of 2021. In addition to the factors mentioned before, the net income was affected positively by less financial expenses amounting to 4.7 billion pesos in the first quarter of 2022, compared to 10.8 billion pesos in the first quarter of 2021, mainly due to the reduction of investments and the corresponding interest due. negatively by higher income tax for the period which grew from 0.7 billion pesos in the first quarter of 2021 compared to 1.8 billion pesos in the first quarter of 2022. A loss related to exposure to the changing purchasing powers of the currency that totaled 3.1 billion pesos compared to 0.3 billion pesos in the first quarter of 2021. Money collection related to trade receivables and wealth obligata plans totaled 2 billion pesos in the first quarter of 2022 as compared to 1.7 billion in the first quarter of 2021. The amounts are being collected on time according to the signed contract. Going to page 10, you can see our cash flow for the first quarter of 2022. Next, net cash provided by operating activities was 8.1 billion pesos, this including 2 billion pesos in collections from world-wide installments. Net cash used by investing activities was 6 billion pesos mainly due to acquisition of short-term financial assets. Thank you, and now we invite you to ask any question you may have.
spk00: Ask a question, you may press star 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then 2. At this time, we will pause momentarily to assemble our roster. Once again, please press star 1 if you have a question at this time.
spk05: And we did have a question come in.
spk00: The first question is coming from Martin Aronset from Balance Capital. Martin, your line is live.
spk04: Thanks. Martin Aronset here from Balance Capital. First of all, congratulations on the results. I have four questions. I would like to run them one by one if that's okay. My first question is, we saw a great quarter in terms of revenue, partly due to high thermal dispatch. We would have expected that OPEX would have raised on as well with the social production, but OPEX was flat quarter over quarter. If you can comment a bit on the situation, please.
spk03: Okay, thank you Martin for your question. Regarding the dispatch of our term of units, we are seeing as we have a draw in the Comahue area for the hydros, we are seeing much more dispatch of our steam turbines than in the past years. So we are, and additionally the more fuel that we are using because the lack of gas, somehow we are seeing much more dispatch of our steam turbines, not because they have a better cost, because they are, in terms of necessity in the region, especially in the AMBA region, we are seeing that effect So since that we maintain that draw or the draw is maintained in the Comahue, we will see more or less the same dispatch of our steam turbines. And additionally, the other important thing is the gas, the natural gas quantity. If we start seeing more LNG coming from Escobar, perhaps the units will receive less dispatch. But it's depending on that, depending on hydro in Comahue and natural gas available in Santa Fe region especially. The other thing is the OPEX. We could see perhaps a little bit more OPEX but nothing I think significantly talking about the steam turbines. we can see perhaps some increase, especially in, I think, turbine number eight and number seven, but nothing significantly. In the other hand, we will face, not this year, but the next one, the 2024 and 2025 for the combined cycle. we will need to face the lifetime extension, but not for 22.
spk04: Okay, right. Well, my second question is about the availability. There were certain issues affecting thermal availability from the pollution during January. Are you seeing this situation as fully resolved, or are you still working on structural fixes?
spk03: No, with this, yes, as you mentioned, we have extraordinary maintenance in our cogeneration plant in Lujan de Cusho. This cogeneration was entered online in 2019. It's a new one, so we didn't expect that failure. We are doing, with the manufacturer, the analysis about what happened with the, specifically was a failure in the GR box. It's already solved. That was solved in January, but we are analyzing what happened with that GR box, but it's not a normal failure. So the GR box was replaced, so we have a new one, but we are analyzing what was the cost of that, but we are not expecting any additional failure there.
spk04: Okay, great, thanks. My third question is regarding the E01 sessions. We are getting near the maturity days according to the regulations on the schedule date. Will it be up to this government to decide or re-option or extend the concessions or should it be up to the next government after 2024?
spk03: Well, as you mentioned, contractually we don't have an option to extend, so it's a negotiation that we need to have with the government, with the national government. The government is the one that gives us the concession. So the contract doesn't specifically set a clause that allows us to extend automatically, so we need to... to discuss with them. We are entering a discussion, of course, but as you can imagine, all the problems in the federal administration led that discussion a little bit apart. The end of the concession, specifically in the case of Piedra y Laila, is after the election, the 2023 election, and even after the change of government because it's after the 10th of December. So, I don't know. We are talking with this government, but we didn't have any advances in terms of a new concession. We are talking additionally in terms of technical things like what we need to do if we extend the concession, what topics we need to do, but not specifically having any advance in terms of a new concession period.
spk04: Okay, so it would be left to the next one. And my last question is, do you have any updates on plant capacity expansions, either by the IAEA and Gregorio Lopez, or many other initiatives?
spk03: Yes, yes. We are seeing that the COVID issue is something that is, I don't know, it's already controlled, but it's already not a big issue like in the past. We are analyzing, yes, we're analyzing the closing of the P&L Lopez Combined Cycle. We are in the early stages because we need to go back with the EPC constructors and start seeing Of course, we have much more information because we already operate the unit, so we have much more information than in the past, so we need to go back to the PC constructor at that time and start working again in analyzing which are the CAPEX that we need to do and the process itself because, as you know, it's a brownfield. We already have almost everything in terms of capex, so it's much more civil works and labor that we need to put there. But yes, we are still analyzing again the possibility. Of course, we don't see nothing this year, but it could be next one.
spk04: So it could be something that you talk about in the next quarters, maybe. Sorry, can you repeat? It could be something that you tackle in the next quarters.
spk03: Yes, but we are in very early stages right now.
spk04: Okay. Thank you very much.
spk00: Thank you. Again, if you have a question, please press star, then 1. And we did have another question come in from John Barnett from Barnett & Associates. John, your line is live.
spk01: Thank you. I was wondering if you guys can provide some commentary regarding your capital expenditure requirements. And is there any deferred capital expenditures that you guys have been holding off on? And if there's any... sort of forward-looking plan for expansion capital expenditures. Thank you.
spk03: Okay, thank you for your question. We are, in terms of regular capex or maintaining capex of our units, you need to separate the combined cycles, which we have a contract with the manufacturer, with the O&M that we expand the capex in terms of how many hours we operate, so there we don't have any capex to say so. As I mentioned previously, in the year 2024 and 2025, we are We need to do an extraordinary CAPEX, which is the lifetime extension of these combined cycles, the combined cycle of Buenos Aires and combined cycle of Mendoza. But we are not postponing any CAPEX in terms of combined cycles. In terms of the steam turbines, as you may know, these are units that have more than 50 years old. performing all the CAPEX to keep them in operation, but of course if you want to extend the lifetime of that unit, we need to talk about something completely different and amounts that are not covered by the regulation today. So, in terms of day-by-day operation in the steam turbines, we are doing the things to keep them in good operation, but we can assume that this will keep that unit operating for, I don't know, five or ten years. If you want to do so, or the government wants to do that, we need to talk about different remuneration. And in terms of expansion, as I mentioned, we are start analyzing again the closing of one open cycle that we have and we want to close in a combined cycle. We already have the steam turbine there, so the main of that is related to the installation and the civil works. That is around, we are not having the quotation, the new quotation from the APC constructors that we are talking about there of one hundred and But this is not for this year, as I mentioned previously. Apart from that, we are analyzing additional renewable projects, but we do not have any concrete projects there. We have only developments, but nothing concrete for this quarter or the next one.
spk05: Okay.
spk00: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Bonnet for any closing remarks.
spk03: 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.
spk00: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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