Central Puerto S.A.

Good morning, ladies and gentlemen. Welcome to Central Puerto's second quarter 2024 earnings webcast. 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, please of the press release, please refer to the Investor Relations support section on the company's corporate website at www.centralpuerto.com. In addition, a replay of today's call may be accessed by accessing the webcast link at the same section of Central Puerto'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 US dollars for the end of each period. The information presented in US dollars is for convenience of the reader only and you should not consider these translations to be representations that the Argentine peso amounts actually represent 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 statements for the second quarter ended on June 30, 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 risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by industry remarks. Thus, 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 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 discussion. On the call today from Central Puerto is Fernando Bonet, Chief Executive Officer, Enrique Taranio, Chief Financial Officer, and Alejandra Diaz-Lopez, Corporate 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 second quarter of 2024. I would like to take a moment to review today's agenda. I will begin the presentation by addressing shortly the main figures of the second quarter of 2024, followed by a quick update of the regulatory framework and relevant 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 Cuarto's main figures for the second quarter of 2024. The group's installed capacity is 6,703 megawatts and energy generation amounted to 4,985 gigawatt hour during the second quarter of 2024, increasing 5% year over year. So with these figures, Central Puerto keeps its leading position as a private power generation company, both in terms of installed capacity and energy generation. through a well-diversified portfolio of asset and power generation technologies. Regarding our financial results, it should be noted that after the sharp devaluation that happened on December of 2023, the exchange rate kept almost flat during the first six months of 2024, while inflation, though decreasing since 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 metrics. Revenues for the second quarter of 2024 amounted to $168 million, increasing 15% year over year compared to the second quarter of 2023. while adjusted EBITDA reached $46 million, shrinking 27% versus the second quarter of 2023. Net income for the period was positive in $8 million, decreasing 49% year-over-year. Finally, after debt consolidation as a result of recent M&A operations, loan repayments and dividend payments, Net debt as of June 30, 2024 amounted to $229 million, a reduction of $58 million vis-à-vis December 2023, showcasing a net debt-to-adjusted EBITDA ratio of 0.9 times. Now let's move to the most recent regulatory updates and relevant facts. We have anticipated in our last call the Resolution 50A issued by the Secretary of Energy on May 6th concerning on-page receivables with CAMESA. Regarding this resolution, Central Puerto finally accepted on May 16th the payment mechanism by means of which trade receivables accrued in December of 2023 and January of 2024 were paid with Argentine Republic USD bonds at face value, while receivables accrued in February of 2024 were paid with funds available in Camisas Bank's account and transferred by the national government to the Stabilization Fund. This resolution carried out a consolidated loss of approximately 20,459 million pesos, or approximately $22.5 million. However, it should be noted that this resolution did not affect the ordinary course of business of the company, its payment capacity, nor its available financing options. Regarding the situation of Piedelaila Hydro operation, on May the 17th, the Secretary of Energy issued Resolution 78 by means of which it extended the transition period up to December the 28th of 2024, as it is allowed in the concession contract. On June the 14th, the Secretary of Energy Issue Resolution 99, which updated remuneration prices for energy and power sold in the spot market. Remuneration values increased 25% since June the 1st of 2024. So this price adjustment affects positively our revenues during the period under analysis, but just for one month. Then the thermal generation tender process called TERCONF was finally canceled as it was determined by a resolution 151 issued by the Secretary of Energy on July the 8th. Finally, there was another price adjustment determined recently by the Secretary of Energy. Although it has no impact on the second quarter figures, It should be noted that a 3% increase on power and energy prices was granted since August the 1st by means of Resolution 193. Continuing with news and relevant facts, we have also anticipated in our last call the investment made in the mining industry. Let me recall that on April the 22nd, our subsidiary Proener entered into a common shares subscription agreement with AbraSilver Resource Corporation, by means of which it was granted with a 4% interest in the share capital of the aforementioned company, which is the owner of the Silver Gold Project Diablisius, located in the northeast region of Argentina. With regards to the investment project currently in execution, let me tell you that In the case of San Carlos Solar Farm, construction agreements with Shanghai Electric Power Construction Company were signed on March 27, and works began on July 31, being April of 2025, the COD. As of today, all permits are in place. Local vendors have already initiated their purchasing process and the site is being prepared for construction and assembly. Also, equipment is being delivered to Argentina. In the case of Brigadier López combined cycle, as you may recall, Centro Puerto is going to convert an open cycle thermal power plant with the gas turbine into a combined cycle of thermal power plant with the addition of a steam turbine. The EPC supplier, SACDE, received the notice to proceed on February 26, 2024, and the COD is scheduled for October 2025. As of today, works on the site have already started, with the assembly of pipes and wires, communication system, and water intake system. It is important to notice that both projects are on schedule and on budget. Now let's skip to the Argentine energy market picture of this quarter that will be shown on slides seven and eight. By the end of the second quarter of 2024, the country's installed capacity reached 43,603 megawatts, which means an increase of 0.5% or 198 megawatts. compared to the 43,405 megawatts recorded as of June the 30th of 2023. The variation is a combination of the installation of new power facilities and the addition of capacity adjustment and repowering of power plants that were already in operation. The positive variation of 198 megawatts is decomposed as follows. we have an increase of 533 megawatts of renewable sources of which 368 megawatts corresponds to wind farms 50 megawatts of new power plants installed during the second quarter of 2024 155 megawatts to solar plants of which 12 megawatts corresponds to new power plants installed during the second quarter of 2024, and 9 megawatts to biogas power plants. Then we have a decrease of 335 MW in thermal sources, which includes a positive variation of 527 MW of combined cycles and a negative variation of 862 MW of gas and steam turbines and diesel engines. Generation rose 6% during the quarter on a year-over-year basis. The growth was basically driven by nuclear and hydro generation. Renewable generation also rose, but on a much smaller scale. Nuclear generation was significantly higher as a result of the reincorporation of Atucha II power plant, which was in maintenance shutdown during the first half of 2023. This power plant resumed operation in August of 2023. Hydrogeneration rate of growth was remarkable, especially in May, with 60% of growth year over year, due to the outstanding increment in the flow of river. We have Uruguay River with a growth of 500%, the Limay River with 82% of growth, and the Cochoncura River with a 45% rate of growth. The higher supply of nuclear, hydro, and renewables prompted a lower thermal dispatch, and as a consequence, a lower fuel consumption was registered. A 12% decrease was registered in equivalent natural gas of 1 million cubic meters. Focusing now on the demand, as you can see, electricity demand increased 2% to 33.4 terawatt hour, compared to 32.9 terawatt hour recorded during the second quarter of 2023, which is basically explained by a rise in residential consumption due to weather conditions. On average, the temperature was 0.9 grades lower during the second quarter of 2024 when compared to the same period of last year may was the coldest month during the second quarter of 2024 with temperatures 3.7 grade lower than the same month of 2023 not surprisingly residential consumption skyrocketed along this single month, increasing 29%. Although the electricity trade balance during the second quarter of 2024 resulted in a net import situation, exports were higher and imports lower during this quarter, vis-a-vis the second quarter of 2023, thus reducing the net import balance. We now go to slide 9, to our key operating indicators for the quarter. We can see that energy generated by Central Puerto rose 5% to 4,985 GWh, compared to 4,762 GWh during the second quarter of 2023. In the second quarter of 2024, hydro energy generation from Piedra del Aguila increased 94% as compared with the second quarter of 2023, reaching 978 gigawatt hour as a direct result of higher levels of water available for generation, which was a direct consequence of higher flow of river, as we have recently explained. With regards to renewables, energy generation increased 5% in the second quarter of 2024, compared to the second quarter of 2023, being basically explained by the 48 gigawatt hour generated by one Israel solar farm acquired in October of 2023. Speaking specifically, of wind generation, it decreased almost 8% or 30 GWh, reaching 354 GWh during the second quarter of 2024. This is primarily due to the storm that hit Bahia Blanca in December of 2023, which impacted La Castellana too. Generation from La Castellana 1 was also lower due to maintenance works, carry-ons and blades. Regarding thermal generation, it decreased 7% in the second quarter of 2024 compared to the second quarter of 2023. basically as a result of lower dispatch of some units which was a direct consequence of higher hydro and nuclear aggregate supply in the system as we explained earlier regardless the lower dispatch it should be highlighted the good availability figures for the quarter both against the market average and against Central Puerto's own metrics for the second quarter of 2023. Despite the lower thermal dispatch during this quarter, I mean the second quarter of 2024, for the whole system and Central Puerto, it should be noted the higher generation of Buenos Aires combined cycle as a consequence of the maintenance program carried out last year. Now, let's move to our revenues breakdown. As you can see on slide 10, this amounted to $168 million in the quarter as compared to $147 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 second quarter of 2024 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, thus making the comparison with the second quarter of 2023 more complex to analyze. Hence, having in mind this effect, the variation in revenues is a consequence mainly of a 14% or $10 million increase in spot sales driven by a higher dispatch of Piradelaida hydropower plant, higher availability of some thermal units, especially in central Costanera, and also higher generation from Buenos Aires combined cycles. An 8% or $5 million increase in sales under contract, mainly explained by the recent acquisition of the solar farm, and higher sales of cogeneration units. Basically, we are speaking of Lujan de Cuxa facility. Sales of wind farms were lower due to lower wind generation. As we mentioned before, La Castellana 2 was hit by a twister in December of 2023, and there was maintenance work carried on some blades in La Castellana 1. Finally, there was a 42% or $3 million increase in steam sales driven by basically higher production levels in Lujan de Cucho facility. which is basically a consequence of higher availability of units and a higher demand from YPF. On slide 11, we can see the dynamic of our adjusted EVDA. During the second quarter of 2024, the group's adjusted EVDA amounted to $46 million, shrinking 27 percent or 17 million dollars when compared to the 63 million dollars in the same quarter of 2023 when analyzing the adjusted evda we can observe that the variation is mainly explained by the previously stated higher aggregate sales driven by spot sales and sales from the contract, and a positive non-cash effect on the gap between currency devaluation and inflation. Then we have a 4% or $2 million decrease in cost of sales, explained basically by a reduction of some production costs. compensations to employees, consumption of materials and spare parts, and forestry and forest production services expenses, being all partially upset by a negative non-cash effect on the gap between currency devaluation and inflation. SG&A decreased 9% or $2 million, mainly by lower fees and compensation for services and lower taxes. Again, being partially upset by a negative non-cash effect on the gap between currency devaluation and inflation. Finally, other operating results net in the second quarter of 2024 were lower than the second quarter of 2023 figures by 365% or $42 million, basically as a consequence of the impact of the Resolution 58. There were also lower interest from client and lower positive effect difference and a negative non-cash effect on the gap between currency devaluation and inflation. Moving to the next slide, the consolidated net income. During the second quarter of 2024, Central Puerto's net income amounted to $8 million, decreasing 54% or $9 million on a year-over-year basis. The net income was positively affected by non-cash effects, including results generated by the change in purchasing power of the currency, variation in biological assets, and lower DNA. These items were practically upset by lower funny FX difference and interest. Then we have net financial results, which decrease $1 million year over year, basically by lower interest earned and lower variation in the for value of financial assets. These items were partially offset by lower foreign exchange difference on financial liabilities, lower bank commissions, and higher share of the profit of associates. Finally, on slide 13, we have the cash flow dynamic during the sixth month of 2024. Net cash provided by operating activities was $67 million during the sixth month of 2024. This amount is mainly explained by higher income before income tax for the period and higher interest and from clients being all partially offset by tax payments. Then the net cash used by investing activities was $13 million during the first quarter. six months of 2024. this amount is basically explained by the capex allocated to san carlos and brigadier lopers projects being partially upset by the sale of some financial assets finally financing cash flow was negative in 66 million dollars during the first six months of 2024. This is basically the result of long-term loan repayments and interest payments, dividend payment being all partially offset by lower bank and investment account overdraft and long-term loan disbursement. Consequently, our cash position as of June the 30th of 2024 amounted to $5 million. If financial assets are included, our total current liquidity amounts to $158 million. With this, I conclude the presentation, and now we invite you to ask any question to our team. Thank you very much for your attention.

We will now begin the question and answer session. To ask a question, you may press the star key, then 1 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 2. Once again, that's star 1 if you wish to ask a question today. At this time, we will pause momentarily to assemble our roster. And the first question today is coming from Martin Aralset from Balance Capital. Martin, your line is live.