Central Puerto S.A.

Good morning ladies and gentlemen and welcome to Central Proecto's first quarter 2024 earnings webcast. 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 relations support section on the company's corporate website at www.centralperto.com. In addition, a replay of today's call may be accessed by accessing the webcast link at the same section of the Central Perto's website. Before we proceed, please be aware that all financial figures were prepared in accordance with IFRS and were converted from Argentine pesos to US dollars for comparison purposes only. The exchange rate used to convert Argentine pesos to US dollars was the reference exchange rate reported by the central bank for U.S. dollars for the end of each period. The information presented in U.S. dollars is for the convenience of the reader only and should not consider these translations to be representations that the Argentine peso amounts actually represents these U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Finally, it is worth noting that the financial statement for the first quarter ended on March 31, 2024, include the effects of the inflation adjustments. Also, please take into consideration that certain statements made by the company during this conference call and answer to your questions may include forward-looking statements. which are subject to risk and uncertainties that could cause actual results to be materially different from the expectation contemplated by industry remarks. Thus, we refer you to the forward-looking statement section on earnings release and recent filings with the SEC. Central Prato 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 Terrano, Chief Financial Officer, and Alejandro Diaz-Lopez, Chief Finance and Investor Relations Coordinator. And now, I will turn the call over to Alejandro Diaz-Lopez. Please Alejandro, you may begin.

Thank you very much and good morning to you all. Thank you for joining us today on our earnings presentation, where our management team from Buenos Aires, Argentina, is going to comment on our financial results of the first quarter of 2024. I would like to take a moment of your attention to review today's agenda. I will begin the presentation by addressing shortly the main figures of the first Q2024, followed by a quick update of the regulatory framework and news. Then I will show an overview of the Argentine energy sector, moving afterwards to our operational and financial results. Finally, at the end of the presentation, we will be happy to address any question you may have. Before going into a more exhaustive analysis of our financial and operational results, let me briefly review Central Puerto's main figures for the first year of 2024. As you may recall, with the acquisition of Central Costanera performed in mid-February of 2023, and the Guanisville Solar Farm in October of 2023, the group's installed capacity has jumped 49% to 7,173 MW. Furthermore, energy generation amounted to 5,520 GWh during the first three months of 2024, which means an increase of 8%. These figures make Central Puerto the largest private energy generation company in Argentina, both in terms of installed capacity and energy generation, with a well diversified portfolio of assets across almost all power generation technologies. Regarding our financial results, it should be noted that after the sharp devaluation that happened in December of 2023, the exchange rate kept almost flat during the first three months of 2024, while inflation, though decreasing from December of 2023, was significantly higher. This dynamic generated inflation in dollars in Argentina. Due to Central Puerto's accounting methodology, all items in pesos must be adjusted for inflation to the end of the quarter local currency. while the company reports its results in dollars by converting them at the end of the period official exchange rate. I mean, the so-called central bank, a 3,500 exchange rate. This causes a non-cash impact that affects positively or negatively as appropriate our financial results. Revenues for the first Q of 2024 amounted to $150 million, increasing 15% compared to the first Q of 2023, while adjusted EBITDA reached $84 million, a growth of 36% versus the first three months of 2023. Net income for the period was positive in $32 million, rising almost six times on a year-over-year basis. Finally, after debt consolidation as a result of M&A operations, loan repayments and dividend payments, our net debt as of March 31, 2024, amounted to $326 million, a decrease of $100 million. This means a net debt-to-adjusted VDI ratio of 1.1 times. Now, let's move to the most recent regulatory updates and relevant facts. We have anticipated in our last call the Resolution 9 issued by the Secretary of Energy in February of 2024. We should take into account that this resolution applies as of February the 1st of 2024, so it affects positively our revenues for the period. On April the 22nd of 2024, our subsidiary PRANER entered into a common share subscription agreement with AbraSilver Resource Corporation, which is a Canadian company listed in the Canadian stock market. This agreement granted PRANER with a 4% interest in the share capital of the aforementioned company, that owns the silver-gold project Diablisius, which is located in the northeast region of Argentina. Finally, we should highlight the Resolution 50A issued by the Secretary of Energy a couple of days ago. This resolution determines the payment mechanisms for trade receivables accrued in December 2023, January 2024, and February 2024, that are still unpaid. These receivables as of March the 31st amount to 102,123 million pesos or approximately 119 million dollars. The said mechanism establishes that receivables accrue in December of 2023 and January of 2024 will be paid with Argentine Republic USD bond at face value, while receivable accrue in February of 2024, will be paid with funds available in Camesa's bank's account and transferred by the national government to the stabilization fund. Central Puerto is analyzing the impact of the resolution and assessing all the necessary measures that could be taken to preserve its rights. As of the day of the resolution, if the aforementioned mechanism was put in place, the company would have an estimated economic loss of approximately 24,450 million pesos or approximately 29 million dollars, without including any default interest. Now, let's skip to the Argentine energy market picture of this quarter that will be shown on slides 6 and 7. By the end of the first quarter of 2024, the country's installed capacity reached 43,873 megawatts, which means an increase of 1% or 595 megawatts, compared to the 43,278 megawatts recorded as of March the 31st of 2023. The growth in capacity was basically due to First, the incorporation of 680 megawatts, which means a growth of 13%, from renewable sources, of which 378 megawatts corresponds to wind farms, 290 megawatts to solar projects, and 12 megawatts to biogas power plants. Finally, a net decrease in thermal sources of 85 MW, representing a contraction of 1%, which includes the addition of 387 MW of combined cycles and a decommission of 345 MW and 137 MW of gas turbines and diesel engines, respectively. All of these figures may include megawatts of new facilities, as well as adjustment and repowering of power plants that were already in operation. Regarding energy generation in the first Q of 2024, it increased 2% to 39,285 GWh compared to the 38,629 GWh generated during the first Q of 2023. While thermal source continues to be the backbone of the Argentine electricity sector, this type of generation dropped 9% year-over-year and its participation share in the energy matrix declined 6 percentage points year-over-year to 54%. Nuclear power plants generated 71% more year-over-year, while their participation share was 8%, followed by renewables, with a participation share of 14% and a 20% increment in generation, and Hydro, with a participation share of 23% and a 5% growth in generation. Lastly, it's worth mentioning that the increase in nuclear generation along the quarter was basically explained by the reincorporation of A2J2 power plant in August of 2023, being a maintenance shutdown before then. Also, the lower thermal dispatch during the first Q of 2024 triggered lower alternative fuels consumption, I mean a decrease of 96% of fuel oil and a contraction of 83% of diesel. Focusing now on the demand, as you can see in the first Q of 2024, dropped 4% vis-a-vis the first Q of 2023. prompt by a 6% shrink in residential consumption. The first Q of 2023 as a whole was exceptionally warmer than the first Q of 2024, especially March. This configuration boosts a trend decrease in demand along the quarter, I mean the first Q of 2024. But on February the 1st of 2024, a new historical power demand peak was recorded, 29,572 MW. Shifts in temperatures and specific conditions of generation units allow an energy export in January and net imports in February and March. We now go to slide 8 to our key operating indicators for the quarter. We can see that energy generated by Central Puerto rose 8% to 5520 GWh compared to 5122 GWh in the first Q of 2023. It should be noted that this increase includes the incorporation of 714 GWh generated by Central Costanera, which was acquired in mid-February of 2023, as well as 82 GWh produced by Wanui Suil Solar Farm acquired in October of 2023. During the first Q of 2024, hydro energy generation from Piedra del Aguila decreased 5% or 40 GWh as compared with the first Q of 2023 levels. This was a direct result of lower water availability for generation and a trend decrease in demand along the quarter. With regards to renewables, except for the incorporation of Guanuizuil solar plant there was a slightly higher wind generation as a result of higher wind results during the period, which represented a 3% difference if compared to the first year of 2023. The generation from Central Costanera represented 54% of our total thermal generation. It is worth to mention the performance of the Buenos Aires combined cycle, which rose its generation by 78% or 73 GWh if compared to the first year of 2023 due to a deep maintenance and rehabilitation program put in place. These figures take into account that Central Costanera began to be operated by Central Puerto by mid-February of 2023. the energy generated by this site was partially offset by lower dispatch and availability of other units. Finally, we should highlight the good availability figures for the quarter, both against the market average and against Central Puerto own metrics for the first Q of 2023. Now let's move to our revenues breakdown. As you can see on slide 9, this amounted to $150 million in the quarter, as compared to $130 million in the same period of 2023. It should be noted that the gap between inflation and devaluation in the period has positively affected the first few 24 figures at the non-cash level. due to the company's accounting methodology and the conversion into dollars using the end-of-the-period official exchange rate, making the comparison with the first Q of 2023 more complex to analyze. Thus, having in mind this effect, the variation in revenues is a consequence mainly of a growth in spot sales of 14% or $9 million driven by Central Costanera acquisition, with full impact in the comparison of January and February figures. This increase was partially upset by lower remuneration in U.S. dollars, partially upset with Resolution 59 issue last year, and lower dispatch, basically Thermal X Central Gozanera. Then we have a 16% or $9 million increase in sales under contract, mainly explained by the recent acquisition of the solar farm Wanisuhil, which contributed with sales of $4 million in the quarter and higher sales of cogeneration units. Sales of wind farms were slightly higher due to higher wind resource. Finally, we have a 229% or 3 million increase in forestry revenues as a consequence, basically, of EVASA group acquisition in May of 2023. On slide 10, we can see the dynamic of our adjusted EBITDA. During the first quarter of 2024, the group's adjusted EBITDA amounted to $84 million, including results of Central Costanera and the forestry companies. Thus, on a consolidated basis, the adjusted EBITDA of the quarter recorded a rise of 10%, or $8 million, compared to the $75 million in the first Q of 2023. When analyzing the adjusted EBITDA, we can observe that the variation is mainly explained by the previously stated higher aggregate sales driven by a spot sale and sales under contract, and a positive non-cash effect on the gap between inflation and currency devaluation. Then we have a 14% or $7 million rise in cost of sales explained basically by higher employee compensation higher energy and power purchases higher maintenance expenses and higher consumption of materials and spare parts driven basically by central costanera acquisition and also a negative non-cash effect on the gap between currency devaluation and inflation we have an increase of 34% or $4 million in the SG&A, mainly driven by lower interest from clients and a negative non-cash effect on the gap between currency devaluation and inflation. Finally, other operating results net in the first year of 2024 were increased 18% or $2 million, basically as a consequence of higher compensation to employees, higher fees and compensation for services and taxes, all driven by central cost and acquisition. Also, a negative non-cash effect on the gap between currency devaluation and inflation. Moving to the next slide, the consolidated net income. During the first Q of 2024, Central Puerto's net income amounted to $32 million, increasing by almost six times on a year-over-year basis. Despite the higher adjusted EBITDA of the period, the net income was positively impacted by non-cash effects increased $48 million, driven by basically results generated by the change in purchasing power of the currency and variation on biological assets. Net financial results increased $16 million, driven by lower foreign exchange differences on financial liabilities and lower bank commissions. These effects were partially offset by a negative variation in the fair value of financial assets. Finally, with a negative impact, we had lower phony FX difference and interest, mostly explained by lower FX difference due to lower exchange rate variation and a higher net income tax. Finally, on slide 12, we have the cash flow dynamic during the first Q of 2024. Net cash provided by investing activities was $9 million during the first year of 2024. This amount is mainly explained by positive results from the sale of financial assets and dividends collected, being all partially offset by capex apply in San Lorenzo facility and capex apply in Brigadier Lopez facility. Operating cash flow was negative in $19 million, which is mainly explained by lower funding collection, higher income tax, being all partially offset by a higher adjusted EBITDA of the period. Finally, financing cash flow was negative in $4 million during the first Q of 2024. This is basically the result of long-term loan repayments and interest and dividends payment, being all partially offset by lower bank and investment account overdraft and lower long-term loan disbursement. Consequently, our cash position as of March the 31st of 2024 amounted to $6 million. If financial assets are included, our total current liquidity amounts to approximately $100 million. On slide 13, we present our financial debt repayment schedule as of March the 31st of 2024. With this, I conclude the presentation, and now we invite you to ask any question you may have to our team. Thank you so much for your attention.

Thank you. We will now begin our question and answer session. To ask a question, you may press the star key and then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the star keys. To withdraw your question, please press star key, then 2. At this time, we will pause momentarily to assemble our roster. Thank you. We have a question from Martin Arancet with Balance Capital. Your line is live.