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Central Puerto S.A. American Depositary Shares (each represents ten Common Shares)
Q2 2022 Earnings Conference Call
8/8/2022
spk01: Good morning and welcome to the Centro Puerto conference call following the results announcement for the second quarter ended on June 30, 2022. All participants will be in a listen-only mode. Should you need any 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.centropuerto.com. A replay of today's call may be accessed by accessing the webcast in the Investor Support section of the Centro 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 the financial statements for the second quarter ended on June 30, 2022, include the effects of inflation adjustments. Accordingly, the financial figures mentioned during the call, including the data from previous periods and the growth comparisons, have been stated in the terms of Argentine pesos at 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 to the forward-looking statements section of our earnings release and recent filings with the SEC. Centro 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 to simplify the discussion. On the call today from Centro Puerto is Fernando Bonet, Chief Executive Officer, and Enrico Terranio, Chief Financial Officer, and Federico Borsori, Financial Controller. Today's presentation will be carried out by Federico as Fernando has a cold and has lost his voice. I will now turn the call over to Federico Borsori. Mr. Borsori, you may begin.
spk06: One moment, we have a slight technical difficulty. Just give me one second. Thank you very much.
spk03: Good morning and welcome. We are joining you today with our management team from Buenos Aires, Argentina, to report results for the second quarter of 2022. After the presentation, we will answer any questions 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 second quarter of 2022. First, I would like to comment on the latest regulatory news in industry. On April 21st, the Secretary of Energy issued the resolution number 238-22, which updated remuneration prices for energy and capacity of units under spot energy framework. Remuneration values increased by 30% retroactively to February 2022 and an additional 10% increase on June 2022. This resolution also eliminated the use factor adjustment that reduced the capacity payment calculation for the units with lower dispatch, paying all generation units regardless dispatch. In our steam turbine With low dispatch, this change implies an improvement of 30% in air capacity payments. Secondly, I would like to mention the following updates regarding the central portal. Central portal successfully built in Gameza's options for 10 megawatts of dispatch priority for our Parque Solar San Carlos project and the matter framework located in San Carlos Delta Province. Now I would like to comment on the main metrics of the industry, as you can see on pages 2 and 3. In terms of its total capacity, the system reached 42,882 megawatts in the second quarter of 2022, resulting in a 1% increase compared to the second quarter of 2021, mainly based in new renewable projects developed. As of June the install capacity continued to be 59% thermal, 25% hydro, 12% renewable, and 4% nuclear. In the second quarter of 2022, energy generation increased 1.8% to 34,486 compared to 33,872 gigawatts in the second quarter of 2021, mainly due to an increase of 41% in hydro, a 12% increase in renewables, partially offset by an 8% decrease in thermal, and 15% decrease in nuclear. Renewables rise was due to the new installed capacity and hydros is related with the increase in river worldwide flows that soften the growth that the region had experienced last year for thermal units there was low dispatch due to the increase of hydro and an overall lower availability of of 77 percent for the second quarter of the 2022 as compared to 83 percent in the second quarter of the 20 As for nuclear source, the decrease was related with the shutdown maintenance of Atucha II nuclear plant. During the second quarter of the 2022, the main sources of energy generation continued to be thermal and hydro, with a share of 60% and 22% respectively, while renewals were 13% and nuclear were 6%. In the first half of the 2022, energy generation increased 1.4% to 70,205 gigawatts compared to 69,204 gigawatts in the first half of the 2021, mainly due to an 80% increase in renewables, an 8% increase in nuclear, and 4% in high-proportional offset by a decrease of 3% in thermal. Finally, as you can see on page 4, energy demand increased 6% up to 34,948 gigawatts compared to 32,858 gigawatts in the second quarter of 2021, where commercial users grew 7%, residential grew 7%, Great demand grew 4%. As of the second quarter of the 2022, demand structure was 46% represented by residential users, 27% by commercial activity, and the remaining 27% was related to great demand industrial slash commercial. In the first half of the 2022, the composition remained stable with 46% residential 28% for commercial, and 27% linked to create demand in industrial slash commercial. Going now to our key performance indicators for the quarter, as you can see on page 5, energy generation during the second quarter of 2022 was 4,280 gigawatts of electricity. 14% higher than the same period of the 2021. The increase was mainly caused by a 39% increase in energy generation from thermal units, mainly from terminals 6, due to high dispatch related to the combined cycle full operation and higher dispatch of ported steam turbines. 45% decrease in energy generation from the hydro plant Piedra Iraiza. due to the lower water inflows of the Lima River compared with the second quarter of 2021. 4% decrease in energy generation from renewable units due to lesser wind results. Regarding the availability of our thermal units during the first quarter of 2022, it reached 83% in line with the strong availability history of the Central Port of Equipment. As a reference, the market average availability for thermal units for the second quarter of 2022 was 77%, according to the data from CAMESA. Steam production increased 104%, totaling 585,645 tons produced during the second quarter of 2022, compared to 287,000 tons 484 tons during the second quarter of 2021 due to the commissioning of the Terminal 6 cogeneration plans. Going now to our key performance indicators for the first semester, in the first half of 2022, energy generation increased 23% to 8,865 gigawatts compared to the 7,218 gigawatts for the same period in the 2021. As a reference, domestic energy generation increased 1% during the first half of the 2022 compared to the first half of the 2021, according to the data from CAMISA. Increase in the energy generated by Central Puerto was due to an increase of 37 in electricity generation for thermal units, mainly due to Terminal 6 generation The recovery to the average production of the Siemens-branded combined cycle of the Lujan de Cucho plant, 5% increase in the energy generation from renewable units. This was partially offset by a 16% decrease in energy generation from the hydro plant Tierra del Águila due to lower inflows of Limay River. During the first half of the 2022, machine availability for thermal units reached 83% compared to 89% in the same period of the 2021. Due to above-mentioned extraordinary maintenance in Luján de Cuyo 2 cogeneration and one steam turbine from Puerto Saiz, certain small failures and unavailability in some steam turbines. As a reference, the market average availability for thermal units for the same period was 76% according to the data from CAMESA. In production increases, 90% totaling 1,046,380 tons produced during the first half of the 2022 compared to 549,515 tons during the first half of the 2021 due to the commission of Terminal 6 cogeneration. And now, I will comment on the financial highlights. First, I would like to comment on certain key financial information related to Brigadier López Financial Trust. On April the 5th of the 2022, the existing financial debt under the Brigadier López Financial Trust was canceled. The scheduled majority of this indemnity was August the 2022 and was considered in April as a liability management policy with the aim to reduce financial costs. I will now comment on the results of the second quarter of 2022. Going now to the results for this quarter, as you can see on page 9, our revenues were pesos 19.1 billion as compared to pesos 20.1 billion during the second quarter of 2021. This 5% decrease was mainly due to, first, a 37% decrease in sport energy sales, which totaled pesos 6.4 billion in the second quarter of 2022, as compared to 10.2 billion in the second quarter of 2021. Due to higher inflation and price adjustment and lower generation from the hydro plant, Piedra del Aguila, scheduled maintenance of certain steam turbines from port to site, and the commitment of Terminal 6's plan and the beginning of that contract. Partially offset by, first, a 79% increase in steam sales, which totaled pesos 1.1 billion in the second quarter of 2022, compared to pesos 0.6 billion in the second quarter of the previous year, due to a 104% production increase. And second, a 26% increase in sales under contract, which amounted to pesos 11.1 billion during the second quarter of 2022, as compared to pesos 8.8 billion in the second quarter of 2021. Due to a higher generation of terminal sales, and their performance of wine plant despite a higher inflation adjustment over the pesos depreciation in the period. Going to page 10, we can see the changes in our EBITDA excluding impairment and funding effects difference and interest, which was pesos 12 billion in the second quarter of the 2022 compared to pesos 11.3 billion of the second quarter of the 2021. This 6% increase was driven by the following changes. First, a 5% decrease in revenues explained before. Second, a 5% decrease in the cost of sales that totaled pesos 10.5 billion compared to pesos 11 billion in the second quarter of 2021, primarily driven by lower operational costs. And third, an 8% increase in administrative and selling expenses that totaled pesos 1.3 billion during the second quarter of the 2022 compared to 1.2 billion in the second quarter of the 2021. Continuing with page 10, we can see that the consolidated net income was pesos 2.4 billion in the second quarter of the 2022 compared to a consolidated net loss of pesos 7.2 billion in the same period of the 2021. In addition to the above-mentioned factors, net income was negatively impacted by, first, an increase in financial expenses, which amounted to pesos 6.9 billion during the second quarter of the 2022, compared to pesos 4.7 billion in the second quarter of the 2021, mainly due to an increase in foreign exchange difference and a higher depreciation of Argentine pesos during the quarter. Second, an increase of net monetary position loss which amounted to pesos 4.8 billion during the second quarter of the 2022 due to a higher inflation during the second quarter of the 2022 and higher balance of monetary assets. And positively impacted by, first, the decrease in the impairment charge of property, land, and equipment, that total pesos 6.4 billion during the second quarter of the 2021. Second, 55% increase in foreign exchange difference on operating assets, mainly related to funny trade receivables that generated a Pesos 4.6 billion gain during the second quarter of 2022 compared to Pesos 1.8 billion gain during the second quarter of 2021 due to a higher depreciation of the Argentine Pesos during the quarter. an increase in financial income that amounted to pesos 2.2 billion in the second quarter of 2022, compared to pesos minus 0.3 billion in the second quarter of 2021, mainly due to higher financial assets results in the second quarter of 2022. lower income tax expenses that amounted to pesos 1.1 billion in the second quarter of 2022 compared to pesos 5.5 billion in the second quarter of 2021. Additionally, the share of profit of associates was pesos 0.3 billion gained during the second quarter of 2022 compared to a loss of pesos 0.7 billion in the second quarter of the previous year. Money collections related to trade receipts for Vuelta a Obligado plan total pesos 2.1 billion in the second quarter of 2022 as compared to 3.9 billion in the second quarter of 2021. The amounts are being collected on time and according to the signed contract. Going to page 11, you can see our cash flow for the second quarter of 2022. Net cash provided by operating activities was pesos 16.9 billion. This includes pesos 2.1 billion in collections from Vuelta a Obligados installment. Thank you, and now we invite you to ask any questions you may have.
spk01: We will now begin the question and answer session. To ask a question, you may press star 1 on your phone at this time. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.
spk00: At this time, we will pause while we poll for questions. Thank you. Your first question is coming from Frank McGann of Bank of America.
spk01: Frank, please ask your question.
spk05: Okay, great. Thank you very much. A couple questions if I could. One is just what are the current plans for any stoppages or maintenance in the second half of the year? And also, you know, what are the, you know, any change in demand that you would expect in the second half versus what you've been seeing in the overall trends in the first half? And then if I could ask one additional question, the overall, you know, hydro situation for Piedra del Aguila, I think you mentioned in the release that there was some improvement starting in June. I was just wondering how important that is, how how much better you see the overall conditions as you're looking into the third quarter. And that plant, I believe the contract you have expires next year. I was just wondering if there's any talks going on with the government or plans for a possible renewal of the contract you have for the plant.
spk04: Okay, Frank, thank you. Thank you for your questions. Going to your first question, We are not seeing important maintenance for the rest of the year. Of course, we have small maintenance, regular ones, but nothing is significant for the rest of the year in terms of our equipment, thermal or hydro. We are not seeing big maintenance for the rest of the year. On September, we have an intervention of our combined cycle in Buenos Aires. This is the first big maintenance that we will face for our equipment. In terms of demand, we are seeing some recovery of the demand. In fact, the industrial demand on the levels, more or less on the levels of the 2019, completely recovered after COVID. We are not seeing much more increase in terms of demand, especially if we think that we are seeing some acceleration on the industry growth. And in terms of residential demand, We will need to know how these subsidies restrictions will apply, the new scheme that the government announced. If they will be 400 megawatts per month or per two months, that will depend on how the demand will be reduced in terms of not having the subsidies. For PREDICT, the residential demand for the future, we will need to have more information about the implementation of this new scheme, but we are not seeing a big rising on the demand for the next month. Anyway, in terms of Piedra el Águila, as you mentioned, we are seeing better inflows, especially during this winter. The snow is higher than we expected. in Neuquén, so we are seeing more inflows, but we are not in the top of the dump, so we already are recovering the level of the dump. And depending on how the snow continues and the rain during summer, perhaps we will see We will have more information to see if we come back to the medium levels of production or not. I think today is too early to say that we are in the middle year or we are in the draw year. But in fact, we are seeing an improvement, but we don't know yet if this improvement will continue during the summer. And your last question is regarding the concession. We have some talks with the government, but the previous administration, in terms of energy, I mean, right now with the new authorities, we think we need to start again, and the Ministry of Economy. We then talked with him about that, so I think we need to start again the discussions and see which are the expectations the new ministry have about the concessions, and I think we need to start again with these meetings and these talkings in order to have more information to give to you and the market. Right now it's too early to have an impression or to give some color about that. But, of course, it's something that we have on our agenda, so we expect to start talking about that soon with this new ministry and the new people in charge of electricity and energy. So we will have more information perhaps in the next quarter.
spk05: Okay. If I could follow up just quickly. Remind us what percentage of EBITDA, if you can disclose it, Piedra del Agua represents, and what percentage of EBITDA is currently in U.S. dollar PPAs, if you have the number?
spk04: Well, yes, yes. Right now, with all the... I'm going to answer the second first. Right now, with all the equipment that we have under construction installed, more or less 70% between 70 and 75, depending on how Pirellaila works and how Pirellaila generates, is in dollars and the rest is in pesos at the spot. So the percentages are dramatically changed after we finish the construction of the project that we started constructing during 2017 and 2018. And in terms of EBITDA, Piedra Hila is around $30 million, let's say, is roughly the number of the EBITDA of Piedra Hila.
spk00: Okay.
spk04: Thank you very much.
spk00: You're welcome.
spk01: Thank you. Your next question is coming from Ezequiel Fernandez from Balance. Ezequiel, over to you.
spk02: Good morning, everybody. Thank you for the materials and the presentation, very complete as always. I have actually five questions. Sorry for the extension, but they should be quick, I promise. I would like to go one by one, if you don't mind. The first one is related to the CAMESA payment dates. How are they right now? or how they closed the quarter and what happened in July and the early August.
spk04: Okay, let's go for that. Thank you for your question. In terms of the quarter, the payments started getting better. In fact, that was with the previous administration in the economy. So, coming from 30 days of delay, we reached almost 15 days of delay. until June. Then with the change in the administration, we suffer more delays at the beginning because some signing problems, people that renew, of course, they renew all the stuff in terms of economy and security of energy. And we see increased delay to the 45, 50 days of delay. And with this new change in economy, we are seeing a delay of 60 days, more or less, expecting that when the people get in office and start working again normally, we expect to reduce again this delay I don't know, perhaps again with 30, between 15 and 30 days of delay.
spk02: Okay, great. Then regarding Lujan de Cuyo, I know that you have been working during the past quarters on different structural fixes. I don't know if the situation is resolved by now.
spk04: Sorry, you can repeat. You mean some maintenance? What is your question about?
spk02: Yes, about the level of overall availability at Lujan de Cuyo, which had some issues. Okay, yes.
spk04: Yes, yes, yes. Yes, last quarter, at the end of the quarter, specifically in June, we suffered a failure in our unit, one of the units of the cogeneration, the number 26, the DG number 26, We have the same issue that we faced last year with the 27 unit, the other one, which is a failure in the GR box. The GR box connects the turbine with the generator and we need to change, according to Siemens, which is the provider, we need to change some pieces of this year box And we expect that the whole process, we need to bring the pieces. These are very big pieces. We need to bring it in a special cargo. So we have several delays in terms of to find the plane, to bring the pieces. So we are expecting to get the unit online again in the middle of August. I think 2015. between 15 and 19 of this month. Okay, great. We are not expecting to have any more problems with this year because we are changing the main components, so we are not expecting to have more failures related to this yearbooks.
spk02: Okay, great. Regarding the San Carlos project in Salta, congratulations on that. It's 10 megawatts. I don't know if you can share with us any capex expectation for the project and if you could break that down in terms of how much is the panels and the construction and how much is for the transmission payment that you have to make to CAMESA.
spk04: Okay, okay. In terms of In terms of the new project, as you mentioned, we get granted for the capacity for 10 megawatts. We are receiving the – we have more or less the non-budget prices. We are receiving right now in this month the confirmed capex, but we expect with the numbers that we already have around $10 million in capex that we expect to deploy at the end, perhaps the first 30% at the end of the year, and then the rest in the next two quarters. In terms of, as I said, it's a small project connected in 33 kilowatts line, so there is not much more capex related to transmission line. The main components, as you mentioned, are the panels and trackers. That is the main component of the cost that I mentioned to you. More or less 70% related to that. And the rest is the civil wars to install and some connection, but not the big portion of connection. In terms of the capacity payment, sorry. Okay.
spk02: No, no, I was exactly referring to that, the amount of money that you need to pay to CAMESA for the transport.
spk04: In terms of the capacity payment is around $150,000 per quarter. Okay. The amount of capacity payment that we need to pay to CAMESA. The condition of this project will be around between 15 and 18 now.
spk02: Okay, so it's $150,000 per quarter until you finish construction? Yes. Okay, that's great. And I don't know if you have any updates regarding the Brigadier Lopez closing.
spk04: We're still working on that. We are analyzing very in detail the quantity of CapEx and of course we are analyzing in detail all the COVID complexity in order to have the project ready to launch whenever we finish that analysis. And additionally, we are making a huge analysis about how the equipment is was maintained by Enarsa, so that takes time for us, and we are working with Siemens on that, but we are in a preliminary stage of analysis and trying to be ready when the economic conditions and the COVID conditions are getting more clear for us to launch the project. But we are not launching yet.
spk02: Great. I have a final one related to dividends. I understand that you're still limited by some of the covenants on the loans that you took. If we could expect that to be changed at some point in time this year or the next one.
spk04: We are not expecting for this year for sure. The next one we will see. In the next one, we have to pay some portion of the loan. I think it's $35 million, and I think there we can have some release. We need to analyze if we can reach all that number and pay all that number, we can have some release on that restriction, but not for this year for sure.
spk02: Okay, that's great. Thank you very much for your time. That was very clear. Thank you for your question and your interest.
spk01: Again, ladies and gentlemen, if you have a question, please press star 1 on your phone at this time. I don't know, gentlemen, if you've got any questions that have come through on the webcast that you'd like to look at. Okay, we appear to have no further questions in the queue on the phone lines. I will hand back over to the management for any closing remarks.
spk04: Okay, 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.
spk01: Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your phone lines and have a wonderful day.
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