Central Puerto S.A.

Good morning and welcome to the Centro a Puerto conference call following the results announcement for the fourth quarter ended on December 31, 2022 and full year 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 IFRS and are stated in Argentinian pesos unless otherwise noted. It is worth noting that the financial statements for the fourth quarter ended on December 31, 2022 and full year 2022 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 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 today from Central Puerto is Fernando Bonet, Chief Executive Officer, Enrique Teranio, Chief Financial Officer, and Federico Borsori, financial controller. And now I will turn the call over to Federico Bozzori. Mr. Bozzori, 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 fourth quarter of 2022 and full year, and then 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 operative figures for fourth quarter and full year of the 2022, and the most recent financial news and results. I would like to mention the following updates regarding Central Puerto. On December 14th of the 2022, the Secretariat of Energy issued the resolution number 826, which increases the tariff for capacity power energy and energy generation under the base energy scheme. The resolution increases retroactively 20% from September of the 2022, an additional increase of 10% from December of the 2022, 25% increase from February of the 2023, and 28% from August of the 2023. On February the 7th of the 2023, through resolution 59 of the 2023, the Secretary of Energy authorizes generators that have combined cycle units to adhere to the agreement on availability of power and improvement of efficiency with the aim of encouraging the necessary investment of major and minor maintenance of the machines. Through this agreement, the other generators undertake to achieve at least 85% availability of average month power in exchange for a new power and generation price. In the case of power, an amount of $2,000 per megawatt month is established plus the sum in pesos corresponding to 85% and 65% of the power value established in resolution 826 of the 2022 for the periods of spring and autumn and summer and winter respectively. Additionally, the price for generated energy is set at $3.5 per megawatt hour in the case of using gas and at $6.1 per megawatt hour for alternative fuels. The adherence to the agreement by the company, together with the improvements downloaded by the Resolution 800 and 2026, represents a significant increase in the income of the thermal units, the effects of which will be fully verified in the 2023 period. On December 23rd of 2022, the Ordinary General Assembly of Central Puerto decided to distribute as a dividend the amount of 2.88 pesos per share. New investments and acquisitions. In line with our growth strategy focused on new opportunities in the energy sector and other business in which Argentina shows strong competitive advantages, we performed the following transactions. On December 27th of 2022, Provener, an affiliate controlled by Central Puerto, acquired 100% of the capital stock and votes of Forestal Argentina and Maciza Forestal. Both companies were acquired to Maciza Chile, consisting of approximately 72,000 hectares in the province of Entre Rios and Corrientes, of which approximately 43,000 hectares are planted with eucalyptus and pine. The transaction price was 69.4 million dollars. This is the largest transaction in the forestry sector in the last 30 years in Argentina. In this way, Central Puerto becomes the main Argentine company in the forestry sector, a market in which foreign capital companies mostly operate. Central Puerto has made a strategic decision to invest in those sectors in which the country has clear competitive advantages. Argentina has one of the highest growth rates, not only in the region, but also worldwide. Trees grow about 10 times faster than in the northern hemisphere. That is why the forestry sector provides one of the businesses with the greatest competitive advantages and higher growth potential in Argentina. Being a source of future business, opportunities linked to carbon credits and energy generation with biomass. On February 17th of 2023, Brunel acquired from Enel Argentina $75,000. 68% of the capital voting and stock of Enel Generación Costanera. The transaction price amounts to $48 million. By taking possession of Central Costanera, Central Puerto reinforces its growth in Argentina, consolidating as a market leader in the generation sector. The value of Central Costanera represents a unique opportunity as a strategic asset. The growth potential of this acquisition is based on the operational and corporate synergy. experience management and knowledge in technical and operational fields. We believe that it is necessary to increase the power availability of the Central Costanera machines in order to strengthen and cover the demand at the national level. All of this means that the acquisition cost does not accurately reflect the enormous growth potential of Central Costanera. Provener celebrated a stock purchase agreement with TENEL Argentina and Enel Americas, in which Enel Americas agreed to sell to Proener its participation interest in Inversora Doxud, representing 57.14% of Inversora Doxud capital and voting stocks. And Enel Argentina agreed to sell to Proener its participation interest in Central Doxud of 0.24% of Central Doxud capital and voting stocks. indirectly representing 41.25% of the capital and voting stock. This transaction is subject to certain conditions not accomplished at the issue of this report. $54 million is the amount offered by Central Puerto to acquire the participation interest in Inversora Dock Suite. Now, I would like to comment on the main metrics of the industry, as you can see on page five. In terms of in-store capacity, the system reached 42,927 MW in the fourth quarter of 2022 compared to 42,988 MW in the fourth quarter of 2021, resulting in a 0.1% decrease. As of December 21, 2022, the installed capacity is divided in 59% thermal, 25% hydro, 4% nuclear, and 12% renewable. In the fourth quarter of 2022, energy generation decreased 1% to 35,084 GWh compared to 35,534 GWh in the fourth quarter of 2021, mainly due to, first, a 10% decrease in thermal, second, an 83% decrease in nuclear, which was partially offset by a 60% increase in hydro, and a 7% increase in renewal. The decrease in thermal generation was mainly due to lower dispatch related to increased hydro dispatch and lower availability of certain machines, which caused an average system availability of 75% in the fourth quarter of 2022, compared to the 78% of the fourth quarter of 2021. In the case of generation for nuclear sources, the decrease was related to the shutdown for maintenance at the Atucha I and Embalse nuclear power plants. And a technical problem, which the Atucha II turbines, in contrast, the increase in hydro generation is mainly related to the increase in the inflow of the Paranal River due to the opening of the gates of Brazilian dams on the Iguazu River, a tributary of the Paranal River, which softened the water inflow drop due to drought that occurred in the region. Regarding the renewable energies, the increase in generation was related to the increase in installed capacity. In 2022, energy generation decreased 2% to 138,741 gigawatts hour compared to 141,797 gigawatts hour in 2021, mainly due to, first, a 9% increase in thermal, second, a 27% decrease in nuclear, which was partially offset by a 25% increase in hydro and an 11% increase in renewable. Energy demand increases 3% to 34,564 GWh compared to 33,478 GWh in the fourth quarter of 2021, in which residential demand grew 4%, commercial 2%, and large industrial commercial demand at 3%. This same trend can be observed in 2022, in which demand increased 4% to 138,753 GWh compared to 133,477 GWh in the 2021 period. in which residential energy demand grew 4%, commercial activity grew 5%, and large industrial commercial demand grew 2%. Going now to our key performance indicators for the quarter, as you can see on page 8, energy generation during the fourth quarter of the 2022 was 4,687 gigawatts hour, 26% higher than the same period of the 2021. The increase was mainly caused by, first, a 2% increase in energy generation from thermal units, mainly from higher dispatch of Puerto steam turbines, TB7 and TB8. Second, 158% increase in energy generation from the hydro plant Pira del Aguila due to higher water inflows. The reservoir levels started to recover in June of 2022, as the inflow from the Limay and Cochoncura rivers started to rise. Third, a 12% increase in energy generation from renewable units due to an increase in the wine resource and better availability of our wine turbines. During the fourth quarter of 2022, availability for thermal units was 86% compared to 88% in the same period of 2021 due to an extension in the program maintenance of Puerto's Turbine 9 and non-programmed maintenance of the TG27 at Lujan de Cuyo site. As a reference, the market average availability for thermal units for the same period was 75%, according to data from CAMESA. Steam production decreased 4%, totaling 345,173 tons produced during the fourth quarter of 2022, compared to 360,411 tons during the fourth quarter of 2021 due to the lower demand of our client, Terminal 6. Finally, I will refer to the key performance indicators of the full year as started on page 9. In 2022, energy generation increased 21% to 17,484 GWh compared to 14,000 GWh. 392 gigawatts hour for the same period in the 2021. Increase in the energy generated by Central Puerto was due to, first, an increase of 23% in the energy generation from thermal unit due to San Lorenzo combined cycles full year operation and higher dispatch of Puerto side steam turbines. Second, 28% increase in energy generation from the hydro plant Piedra del Aguila due to increases in the water inflows in the Limay and Cochon-Cura rivers. Third, 3% increase in the energy generation from renewable units due to an increase in the wine resource and better availability. During 2022, machine availability for thermal units reached 84% compared to 89% in the same period of 2021 due to, first, an extraordinary maintenance in Lujan de Cusco congeneration. Second, failure in the connection line of Porto combined cycle. Third, extended program maintenance in TB9 steam turbine from Porto site and certain small failures and unavailability in some steam turbines. As a reference, the market availability for thermal units for the same period was 75% according to data from CAMESA. Steam production increased 62% totaling 1.5%. 96 billion tons produced during the 2022 compared to 1.21 billion tons during the 2021. Going now to the results for this quarter. As you can see on page 10, our revenues decreased to pesos 21.4 billion in the fourth quarter of the 2022 as compared to pesos 27.4 billion in the fourth quarter of the 2021. This 22% decrease was mainly due to, first, a 48% decrease in sales under contracts, which amounted to pesos 9.6 billion during the fourth quarter of the 2022, as compared to pesos 18.5 billion in the fourth quarter of the 2021. It was impacted by the ending of Brigadier López TGPPA contract in August of the 2022, which amounted around 5.6 billion pesos. Second, an external maintenance in TG27 of Lujan de Cuyo cogeneration plant. And third, a negatively impacted by a higher inflation adjustment over the pesos depreciation in the period. It's worth to mention that the impact related to the ending of the Brigadier Lopez TGA PPA contract will be recovered with the new PPA contract for the Brigadier Lopez steam turbine when we finished the closing of the combined cycle expected for the first quarter of 2025. The decrease in revenues was partially offset by a 40% increase in spot energy-based sales, which totaled pesos 10.5 billion in the fourth quarter of 2022, as compared to 7.5 billion in the fourth quarter of 2021. due to retroactive increases related with resolution 826 price adjustment and higher heat regeneration. Second, a 6% increase in the steam sales with total pesos 0.8 billion in the fourth quarter of 2022 compared to pesos 0.7 billion in the fourth quarter of 2021. Going to page 11, we can see the changes in our adjusted EBITDA of pesos 6.9 billion in the fourth quarter of the 2022, compared to pesos 17.7 billion in the fourth quarter of the 2021. This 61% decrease was driven by the following changes. First, the above-mentioned drop in revenues. Second, 16% increase in administrative and selling expenses, the total pesos 2.1 billion in the fourth quarter of the 2022, as compared to pesos 1.8 billion in the fourth quarter of 2021. Third, a decrease in other operating results, mainly due to 2.4 billion on one-time gain in the fourth quarter in 2021 related to a recovery of a commercial credit. Fourth, a 6.8 billion increase in foreign and exchange difference and operating assets, mainly related to furniture receivables that generated pesos 8.8 billion gains during the fourth quarter of 2022 compared to pesos 2.1 billion gains during the fourth quarter of 2021 due to a higher depreciation of the Argentine peso during the quarter. Fifth, 20% decrease in depreciations and amortizations that total pesos 4.4 billion during the fourth quarter of 2022 as compared to pesos 5.5 billion during the fourth quarter of 2021. Partially offset by First, 6% decrease in the cost of sales that totaled pesos 12.6 billion compared to pesos 13.4 billion in the fourth quarter of 2022, primarily driven by a 3% decrease in production costs, which totaled pesos 10.4 billion in the fourth quarter of 2022 as compared to pesos 10.7 million in the fourth quarter of 2021. Second, 8.5 billion decrease due to an impairment on property, plant, and equipment during the fourth quarter of 2022, correlated with San Lorenzo combined cycles and some renewal sites, driven by a change in the global macroeconomic variables, increasing the discount rate and increase in the local inflation rate over the devaluation of the peso. As a result, adjusted EBITDA, excluding fixed difference and interest related to furniture receivables and impairment on property, plant, and equipment, was pesos 12.6 billion in the fourth quarter of 2022 compared to pesos 21.6 billion in the fourth quarter of 2021. We can see that consolidated net income was pesos 2.4 billion in the fourth quarter of 2022 compared to a consolidated net income of pesos 1.7 billion in the same period of 2021. In addition to the above-mentioned factors, net income was positively impacted by First, lower deferred income tax due to property plant and equipment impairment that amounted to pesos 1.4 billion gain in the fourth quarter of 2022 compared to pesos 4.7 billion loss in the fourth quarter of 2021 impacted by lower EBITDA and financial results. Second, 12.2 billion of fair value gains on forestry acquisitions and negatively impacted by, first, an increase in net monetary position loss which amounted 8.3 billion during the fourth quarter of 2022 compared to a higher inflation and higher balance of monetary assets partially offset by the share of profit of associates with a Pesos 0.2 billion gain during the fourth quarter of 2022 compared to Pesos 0.2 billion loss in the fourth quarter of 2021. an increase in financial expenses which amounted to pesos 13.5 billion during the fourth quarter of the 2022, compared to pesos 5.2 billion in the fourth quarter of the 2021, mainly due to an increase in foreign exchange difference due to a higher depreciation of the Argentine peso during the quarter, offset by an increase in financial income that amounted to pesos 8.4 billion in the fourth quarter of 2022 compared to financial income pesos 2.5 billion in the fourth quarter of 2021, mainly due to higher financial asset results in the fourth quarter of 2022 of pesos 7.8 billion. Third, higher effects difference and interest in FONI receivables partially offset by negative impact of impairment on property, plant, and equipment. Funding collections related to trade receivables for Vuelta Obligado Plant total pesos 3.1 billion in the fourth quarter of 2022, including VAT, compared to pesos 3.6 billion of the fourth quarter of 2021. The amounts are being collected on time and according to the signed contract. On page 14, we can see the key financial figures for the full year. Revenues decreased 9% to pesos 101.4 billion for the 2022, compared to pesos 111.2 billion in the 2021. The decline in revenues was mainly affected by the termination of Brigadier López TG PPA contract in August of the 2022, and an extraordinary maintenance in TG27 of Lujan de Cuyo cogeneration plant, offset by retroactive increases related with resolution 836 and 238 price adjustment and higher hydro generation. Adjusted EBITDA, excluding permanent FONI effects difference and interest for 2022, reached pesos 67.5 billion compared to pesos 68.8 billion in the 2021, mainly due to lower revenues and lower depreciations and amortizations partially offset by insurance recovery, lower financial costs of operating activities, and lower production costs and decrease in administrative and selling expenses, mainly explained by decreases in compensation services. Finally, consolidated net income was pesos 19.1 billion in the 2022, net loss of pesos 1.3 billion in the 2021, mainly due to fair value gains on foreign trade acquisitions lower the fair income tax due to property plan and equipment impairment.

Going to page 17, you can see our cash flow for fiscal year 2022. Net cash provided by operating activities was pesos 55.6 billion during the 2032. This cash flow arises from, first, pesos 25.8 billion from the other operating results, net obtained during the 2032. Second, pesos 15.8 billion in collection of interest from clients, including the one from phony. Third, pesos 3.4 billion in variations in other non-financial assets and inventories. insurance recoveries of pesos 1.3 billion, and fifth, adjustment to reconcile profit for the year before income tax with net cash flows of pesos 21.1 billion, which was partially offset by, first, income tax expense paid of pesos 8.0 billion, second, pesos 3.7 billion in variation in trade accounts payable, other accounts payable, other non-financial liabilities, and employee benefits liabilities. Net cash in investing activities was pesos 31.3 billion in 2022. This amount was mainly due to pesos 17.9 billion from the investment in short-term financial assets. Second, pesos 10.4 billion in portal acquisition. And third, pesos 3.3 billion in investing in financial assets and capex, which was partially offset by pesos 0.3 billion in dividend collectives. Net cash using in financial activities was pesos 16.3 billion in 2022. This amount was mainly the result of positive 3.6 billion of dividend space. Second, 6.3 billion in debt services amortizations of existing loans mainly related to expansion projects. And third, pesos 6.4 billion in interest in financial expenses mainly related to those loans. Thank you. And now we invite you to ask any questions to our team.