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Central Puerto S.A. American Depositary Shares (each represents ten Common Shares)
Q1 2023 Earnings Conference Call
5/15/2023
spk00: Good morning and welcome to the Central Porto Conference Call following the results announcement for the first quarter ended on March 31, 2023. 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 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.centralporto.com. A replay of today's call may be accessed by accessing the website in the investor support section of the Central Porto 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. 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 Porto 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 Porto is Fernando Bonnet, Chief Executive Officer, Enrique Terraneo, Chief Financial Officer, and Federico Bozzori, Financial Controller. And now I will turn the call over to Federico Bozzori. Mr. Bozzori, you may begin.
spk01: 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 first quarter of 2023, 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 of the first quarter and the most recent financial news and results. I would like to mention the following updates regarding Central Puerto. On December the 12th of 2022, through resolution 826 of the 2022, the Secretariat of Energy authorizes generators a tariff increase of 25% in February of the 2023 and 28% in August of the 2023 to spot energy. On February 7th of the 2023, through resolution 59 of the 2023, The Secretariat 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 investments of major and minor maintenance of the machines. Through this agreement, the adhering generators undertake to achieve at least 85% availability of average monthly 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, autumn, and summer winter, respectively. Additionally, the price for generated energy is set at $3.5 per megawatt in the case of using gas and at $6.1 per megawatt for alternative fuel like diesel. 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 February 17th of 2023, ProEnerg Sociedad Anónima acquired from Enel Argentina Sociedad Anónima 75.68% of the capital and voting stocks of Enel Generation Costanera Sociedad Anónima, called Central Costanera. The transaction price amounted to $48 million. By taking possession of Central Costanera, Central Puerto reinforces its growth in Argentina, consolidating as market leader in the generating sector. The value of Central Costanera represents a unique opportunity as a strategic asset, The growth potential of each acquisition is based on the operational and corporate synergies, experience management, and knowledge in technical and operational fields. On May 3, 2023, Durana Sociedad Anónima acquired 100% of the capital stock and votes of Empresas Verdes Argentina Sociedad Anónima. Las Misiones Sociedad Anónima and Estancias Serinas Sociedad Anónima consisting of 88,000 63 hectares geographically located in the center of the province of Corrientes, of which approximately 26,000 hectares are planted with pine, out of a total of approximately 36,000 plantable hectares. The company is focused on increasing its environmental performance and contributing to global decarbonization objectives. Now, I would like to comment on the main metrics of the industry, as you can see on page 4. In terms of installed capacity, the system reached 43,278 MW in the first quarter of 2023 compared to 42,871 MW in the first quarter of 2022, resulting in a 1% increase. As of March 31, 2023, the installed capacity is divided in 59% thermal, 25% hydro, 4% nuclear and 12% renewable. In the first quarter of the 2023, energy generation increased 8% to 38,627 gigawatts per hour compared to 35,719 gigawatts per hour in the first quarter of the 2022, mainly due to, first, a 1% increase in thermal generation. a 74% increase in hydro generation, which was partially offset by, first, a 28% decrease in nuclear generation, and second, a 3% decrease in renewable generation. The increase in thermal generation was mainly due to higher dispatch. The average system availability was 73% in the first quarter of 2023, compared to 76% in the first quarter of 2022. the increase in hydro generation is mainly related with the increase in the inflow of the Paranal River. In contrast, in the case of the generation from nuclear sources, the decrease is related with a severe technical failure in Atucha II. Regarding renewable energies, the decrease in generation was related to lesser wind resource. Energy demand increased 14% to 39,490 GWh compared to 34,513 GWh in the first quarter of the 2022, in which residential demand grew 25%, commercial 7%, and large industrial commercial demand of 4%. Going now to our key performance indicators for the quarter. As you can see on page 6, energy generation during the first quarter of the 2023 was 5,113 137 GWh, 12% higher than the same period in the year 2022. The increase in the energy generated by Central Puerto was due to, first, a 15% increase in energy generation from thermal units, mainly from the acquisition of Central Costanera, partially offset by lower generation on Puerto's side. Second, an 8% increase in energy generation from the hydro plant Piedra del Águila due to higher inflow of Limay and Cochoncura rivers. partially offset by a 7% decrease in energy generation from renewable units due to lesser wind resource. During the first quarter of 2023, availability for thermal units was 73% compared to 84% in the same period of 2022 due to lower generation due to the technical failures of portosite steam turbines. As a reference, the market average availability for thermal units for the same period was 73% according to data from CAMESA. Steam production decreased 6%, totaling 435,055 tons produced during the first quarter of the 2023, compared to 460,735 tons during the first quarter of the 2022, due to lower demand of our client, Terminal 6 Sociedad Anónima. Going now to the results for this quarter, as you can see on page eight. Our revenues decreased pesos 27.9 billion in the first quarter of the 2023 as compared to pesos 35.1 billion in the first quarter of the 2022. This 20% decrease was mainly due to, first, a 36% decrease in sales under contracts, which amounted to pesos 11.7 billion during the first quarter of the 2023 as compared to Pesos 18.4 billion in the first quarter of the 2022. It was impacted by the ending of Brigadier López's TGPPA contract in August of the 2022 and 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 Brigadier López's TGPPA contract will be recovered with a new PPA contract for the Brigadier López steam turbine when we finish the closing of the combined cycle by the end of the 2024. Second, a 7% decrease in spot energy-avast sales, revenue from the solution 826-22 Secretariat of Energy, which totaled pesos 13.3 billion in the first quarter of 2023, as compared to 14.3 billion in the first quarter of 2022, negatively impacted by a high inflation adjustment over the tariff increase in the period and due to lower generation, mainly for technical failures of portosite steam turbines of pesos 2.8 billion, partially offset by central costanera revenues of pesos 1.8 billion. Third, a 23% decrease in steam sales, which total pesos 1.3 billion in the first quarter of the 2023 compared to pesos 1.7 billion in the first quarter of the 2022. Fourth, FOSG segments that total pesos 1 billion in revenues during the first quarter of the 2023. We can see the changes in our adjusted EBITDA of pesos 29.8 billion in the first quarter of the 2023 compared to pesos 32.2 billion in the first quarter of the 2022. The 7% decrease was driven by the following changes. First, the above-mentioned drop in revenues. Second, 16% increase in administrative and selling expenses that total pesos 2.4 billion in the first quarter of the 2023 as compared to pesos 2.0 billion in the first quarter of the 2022. For Central Puerto, the deviation is mainly driven by pesos 0.17 billion increases in the third-party services. Pesos, 0.11 billion from Central Costanera and pesos, 0.05 billion are coming from forestry segments. Third, 9% increase in cost of sales. The total pesos, 17.0 billion in the first quarter of the 2023 compared to pesos, 15.5 billion in the first quarter of the 2022. deviation is mainly explained by including central costanera for pesos 1.3 billion and policy segment for pesos 0.6 billion partially offset by a reduction in central puerto of pesos 0.6 billion mainly driven by lower third-party services and insurance costs in the first quarter of 2023 fourth three percent increase in depreciations and amortizations the total pesos six during the first quarter of the 2023 as compared to pesos 5.8 billion during the first quarter of the 2022. A pesos 6.4 billion increase mainly explained by first foreign exchange difference on operating assets mainly related to foreign trade receivables that generated a positive variation of pesos 3.4 billion during the first quarter of the 2023. pesos 9.4 billion in the first quarter of 2023 compared to pesos 5.9 billion during the first quarter of the 2022 due to a higher depreciation of the Argentine peso during the quarter. Second, an increase in pesos 4 billion due to a fair value recognition in biological assets from forestry segment. Third, a pesos 1 billion decrease in other income results due to an insurance recovery in the first quarter of the 2022. As a result, adjusted EBITDA excluding FX difference, interest related to furniture receivables, and biological assets fair value recognition was pesos 16.5 billion in the first quarter of the 2023, compared to pesos 26.3 billion in the first quarter of the 2022. In Q1 of the 2023, adjusted EBITDA includes pesos 0.8 billion from Central Costanera since March 2023 and pesos 0.4 billion from forestry segment. We can see that consolidated net income was pesos 0.1 billion in the first quarter of the 2023 compared to a consolidated net income of pesos 9.8 billion in the first quarter of the 2022. In addition to the above-mentioned factors, net income was negatively impacted by first An increase of pesos 7.3 billion in net monetary position loss, which amounted 13.7 billion during the first quarter of the 2023, due to a higher inflation compared to pesos 6.4 billion loss in the first quarter of the 2022. Second, an increase in share of the loss of associates of pesos 0.3 billion in the first quarter of the 2023, amounted pesos 0.7 billion in the first quarter of the 2023 compared to pesos 0.4 billion in the first quarter of the 2022. Third, an increase in financial expenses, which amounted to pesos 14.7 billion during the first quarter of the 2023 compared to pesos 9.6 billion in the first quarter of the 2022, mainly due to an increase in foreign exchange difference due to a higher depreciation of the Argentine peso during the quarter, partially upset by an increase in financial income that amounted to pesos 6.8 billion in the first quarter of the 2023, compared to financial income pesos 3.5 billion in the first quarter of the 2022, mainly due to higher financial asset results in the first quarter of the 2023. Fourth, an increase in depreciation and amortization of pesos 0.2 billion in the first quarter of the 2023 and positively impacted by, first, lower income tax that amounted to pesos 1.4 billion loss in the first quarter of the 2023 compared to pesos 3.7 billion loss in the first quarter of the 2022. Second, an increase of pesos 3.5 billion on foreign exchange difference and interest related to funny trade receivables. Third, fair value recognition forestry segment biological assets that amounted pesos 4 billion. Fauna collections total pesos 3.9 billion in the first quarter of the 2023, including VAT, associated to fauna traceables for Huerta Obligado plant compared to pesos 4 billion of the first quarter of the 2022, representing a total of pesos 3.9 billion in which pesos 0.5 billion corresponds to Central Costanera. The amounts are being collected on time and according to the signed contract. Going to page 12, you can see our cash flow for three months of the 2023. Net cash provided by operating activities was pesos 5.6 billion during the three months of the 2023. This cash flow arises from first pesos 1.5 billion gained from the pre-tax income obtained during the three months of 2023. Second, adjustments to reconcile profit for the year before income tax with net cash flows of pesos 10.5 billion gain. Third, pesos 2.7 billion gain in collection of interest from clients, including the ones from FONI. Fourth, insurance recovery pesos 0.1 billion, partially offset by FIF. pesos 2.1 billion lost in variations in other non-financial asset inventories and biological assets. Sixth, pesos 5.7 billion lost in variation in trade accounts payable. Other accounts payable are non-financial liabilities and employee benefits liabilities. Seventh, income tax paid of pesos 1.4 billion. Net cash used in investment activities was pesos 6.4 billion in the first three months of the 2023. This amount was mainly due to, first, pesos 7.3 billion from Central Costanera acquisition. Second, pesos 1.4 billion on investment in CAPEX, partially offset by, third, pesos 2.3 billion gain in sale of financial assets. Net cash used in financing activities was pesos 1.1 billion in the first three months of the 2023. This amount was mainly the result of, first, short-term financing representing pesos 5.6 billion, partially offset by, second, pesos 0.8 billion of dividends paid. Third, pesos 1.4 billion in debt service amortizations of existing loans mainly related to expansion projects. Fourth, pesos 2.3 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.
spk00: We will now begin 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, please press star then two. At this time, we will pause momentarily to assemble our roster. Your first question for today is coming from Martin Armaset at Balance Capital.
spk02: Hi. Well, thank you for the presentation and for the material, as always. I have four questions. I would like to run them one by one, if that's okay. My first question is about VASA acquisition. I was wondering how much did you pay for the company and if it came with cash or debt. Also, if it was a hard dollar payment abroad.
spk03: Okay, thank you for your questions. In terms of the payment of the bus acquisition, we cannot provide that information because we signed a confidential agreement with the seller. so we are not allowed to comment on the pricing. And in terms of payment, we pay abroad, yes.
spk02: Okay, thank you. And a follow-up, maybe, what VDA do you estimate for these new forests?
spk03: Well, in terms of the BDA, more or less the idea or the decision that we take was the same that they were implementing, the VASA were implementing is to conserve the forest and to increase the quantity of hectares that we plant so we are not We are not selling the trees right now. We expect a better convenient exchange rate and a better convenient price. So we are using the cash flow to increase the hectares plan. So we are not having or the cash that we have received from this also acquisition is not relevant for Puerto right now. for this year at least. We expect to start cutting the trees in next year's coming and increase the EBITDA in those moments, but right now it's almost not relevant for Puerto the EBITDA that these two acquisitions bring.
spk02: Any updates that you can share regarding the Brigadier Lopez expansion and also if you could give us an expected capex for 2023 and 2024?
spk03: Okay, in terms of Brigadier Lopez, we are working with the EPC constructor right now in terms of reaching a contract with them. We expect to have this contract signed, I think, in two months from now, and we expect to have the plant working as a combined cycle at the end of 2024. In terms of CAPEX, we don't have the number yet about the Brigadel Lopez expansion, but we'll be around 130 something million dollars.
spk02: My last question then is about the new Resolution 59. I was wondering what power plants did you add to that and how much additional VTA do you expect from this resolution?
spk03: Okay. In terms of the plans, we signed the contracts for the combined cycle of Buenos Aires, the combined cycle of Mendoza, the combined cycle of Costanera and Mitsubishi, and the combined cycle of the Siemens one, the small one, which is in Costanera also. And we expect, depending on the evolution of the dollars, of course, and the evolution of the rest of the regulation. You know that the portion that we set in dollars is not the whole remuneration. It's a portion. It's $2,000 per megawatt. The rest will still come in from the spot prices that the Secretaria established. But if we can have an increase trying to reach the inflation, and the dollar is not getting lower than inflation in the future. We expect an increase of around $13 million, between $13 and $15 in the 12-month period of new EBITDA coming from these new regulations.
spk02: Very clear, thank you.
spk03: You're welcome.
spk00: Again, if you have a question, please press star then one. This concludes our question and answer session. I would like to turn the conference over to Mr. Bonnet
spk03: for 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 the conference has now concluded thank you for attending today's presentation you may now disconnect
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