Central Puerto S.A.

Good morning, ladies and gentlemen. Welcome to Central Puerto's third quarter of 2024 earnings conference call. A slide presentation is accompanying today's webcast and is also available on the investor section of the company's website at www.centralpuerto.com slash en slash investors. All participants will be in list and only mode during the presentation. After that, 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.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 Argentinian pesos to U.S. dollars for comparison purpose only. The exchange rate used to convert Argentine pesos to U.S. 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 US dollars is for the comparison of the readers only and you should not consider these translations to be representations that the Argentine pesos amounts actually represent these US dollars amounts or could be converted into US dollars at the rate indicated. Finally, it's worth noting that the financial statements for the third quarter ended on September 30, 2024, include the effects of the inflation adjustment. Also, please take into consideration that certain statements made by the company during this conference call and answers to your questions may include forward-looking statements. which are subject to risks and uncertainties that could cause actual results to differ materially from the expectations contemplated by industry remarks. Thus, we refer you to the forward-looking statement section of our earnings release and recent filling with the SAC. 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 around to simplify the discussion. On the call today from Central Puerto is Fernando Bonet, Chief Executive Officer, Enrique Terraño, Chief Financial Officer, and Alejandro Diaz-Lopez, Corporate Finance and Investor Relations. And now, I will turn the call over to Alejandro Diaz-Lopez. Please, Alejandro, you may begin.

Thank you very much, and good morning, everybody. Thank you for joining us today on a new session of Earnings presentation, where we are going to discuss our financial results of the third quarter of 2024. Before we get started, 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 third quarter of 2024, followed by a quick update of the regulatory framework and revenues. Then I will show an overview of the Argentine electricity industry, 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 third quarter of 2024. The group's installed capacity is 6,703 megawatts and energy generation amounted to 5,685 gigawatt hour during the third quarter of 2024, decreasing 1% year over year. Regarding our financial results, it should be noted that due to Central Puerto's accounting methodology, all items in pesos must be inflation-adjusted 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, the so-called Central Bank A3500 exchange rate. This causes a non-cash impact that affects positively or negatively as appropriate our financial metrics. Revenues for the third quarter of 2024 amounted to $185 million, increasing 14% year over year compared to the third quarter of 2023 results. while adjusted EVDA reached $93 million, raising almost 1% versus the third quarter of 2023. Net income for the period was positive in $40 million, doubling year over year. Finally, after debt consolidation as a result of M&A's operation, loan repayments, and dividend payments, net debt as of September the 3rd of 2024, amounted to $149 million, a reduction of $137 million vis-a-vis December of 2023, showcasing a net debt to adjusted EBITDA ratio of 0.5 times. Now let's move to the most recent regulatory updates and news. We have anticipated in our last call the cancellation of the thermal generation tender called DERCOMP by means of Resolution 151 issued by the Secretary of Energy on July the 8th. After the price adjustment established last June through Resolution 99, we were granted with a 3% increase in August with Resolution 193 a 5% increase in September with resolution 233, and a 3% increase in October with resolution 285. Please take into account that this last resolution has no impact for the third quarter of 2024 figures. Resolution 294 deserves special mention. It was established a contingency plan for the electricity industry with the aim to mitigate possible critical situations during the period December 2024-March 2026, with action plans for generation, transmission and distribution, as well as for major demand. Regarding generation, an additional, complementary and exceptional remuneration for power and energy is established with the purpose of ensuring the availability of equipment in critical months and hours. The scheme is for thermal power plants located in critical nodes, determined in Annex 1 of the set resolution, that do not have PPAs nor have adhered to the Resolution 59. As you remember, this was established for combined cycles. This exceptional compensation will be in place for summer periods December, January, February and March between 12 p.m. and 10 p.m. and winter periods, June, July and August between 6 p.m. and 11 p.m. To get the additional remuneration, a generator must declare a committed power. The remuneration for both energy and power is affected by the node criticality factor. which can vary between 0.75 and 1.25. To determine the power remuneration, it is also considered the real availability of the generation unit, which is measured during the aforementioned month and hour. Central Puerto's eligible units to adhere to this resolution include steam turbines located in Buenos Aires and Lujan de Cuyo, gas turbines located in Lujan de Cuyo, as well as the Brigadier López thermal power plan. For Centro Puerto, the additional remuneration for power varies from $2,000 to $2,500, depending on month and units considered. Finally, some key points of the contingency plan include a preventive scheme with backup transformers and mobile generating units in critical nodes. Also, a demand management system is implemented. For certain time slot, may your user with a declared maximum requirement greater than 10 megawatts may propose a reduction in their loads. Continuing with news and regulatory updates, you should take into account that a new adjustment in spot remuneration was determined by means of Resolution 20, establishing a 6% rise since November 1. As with Resolution 285 recently mentioned, this has also no impact in the third quarter of 2024 figures. Regarding the situation of Piedra del Águila hydro operation, the concession was extended for one year by means of Presidential Decree No. 718, issued on August 12. This decree also set forth a national and international public tender for 2025, looking to grant a new 30-year concession for Comahue hydroelectric plants. The last thing to be mentioned. A couple of days ago, the board of directors decided to pay dividends, distributing 39.47 pesos per share. Finally, a concluding remark with regards to the investment projects currently in execution. I mean the San Carlos Solar Farm and the Brigadier López Combined Cycle. Both projects are on schedule and on budget. Work on both projects is progressing as planned and at a good pace without setbacks. The solar farm is expected to be completed by the second quarter of 2025, whereas the combined cycle COD is planned for the fourth quarter of 2025. Now let's skip to the Argentine electricity market picture of this quarter that will be shown on slides seven and eight. By the end of the third quarter of 2024, the country's installed capacity reached 42,919 MW, which means a decrease of 1% or 533 MW compared to the 43,452 MW recorded as of September 30, 2023. The variation results from the installation of new power facilities and adjustments and repowering of power plants that were already in operation. The contraction of 533 megawatts is decomposed as follows. First, an addition of 902 megawatts of renewable sources, of which 622 MW corresponds to wind farms, including 271 MW of new plants installed during the third quarter of 2024, 273 MW to solar plants, including 76 MW of new capacity installed during the third quarter of 2024, and 8 MW to biogas power plants. Then we have a reduction of 1,195 megawatts in hydro sources. And finally, a net decrease of 240 megawatts in thermal sources, where a reduction of 295 megawatts corresponds to gas turbines, a contraction of 470 megawatts corresponds to steam turbines and a shrink of 99 megawatts to diesel engines, being all partially offset by a rise of 624 megawatts in combined cycles. It is worth to highlight that the decline of 1,195 megawatts in hydro installed capacity is basically explained by a reassessment of Cesireta's power available between Argentina and Paraguay. Since August of 2024, 50% of Cesireta's installed capacity is allocated to Argentina, whereas it used to be approximately 88% before then. Generations shrunk 3% during the third quarter of this year on a year-over-year basis. The decrease was driven mainly by hydro generation that shrunk 33% due to a combination of two factors. One, the set change in the allocation of Chaciretas in salt capacity between Argentina and Paraguay and a reduction of river flows. A contraction of 60% was recorded in Neuquén River, a 55% in the Cochoncura River, a 38% in the Limay River, a 26% in the Uruguay River, and finally, a contraction of 22% in the Paraná River. Nuclear generation rose 7%, basically as a result of higher availability and generation Atucha Chu as a result of the reincorporation of this power plant, which was in maintenance shutdown during the first half of 2023. This performance was partially offset by Embalse power plant, which entered into maintenance shutdown in September of 2024 and resumed operations last October. Given the low hydro generation and the moderate supply of nuclear and renewable sources, a higher thermal dispatch was required to cover the electricity demand. The 13% growth in thermal generation led to higher fuel consumption, a 16% rise in diesel consumption, a 9% rise in natural gas consumption, and a 3% for fuel oil. Focusing now on the demand, As you can see, electricity demand increased 1% to 35.6 terawatt hour compared to 35.2 terawatt hour recorded during the third quarter of 2023, which is basically explained by a rise in residential consumption due to weather conditions. Colder temperatures during July and August of 2024, vis-à-vis the same month of 2023, prompt higher reader consumption, which then contracted in September as a result of milder temperatures compared to equal month of 2023. For the whole third quarter of 2024, residential consumption rose 3%, With regards to industrial demand, slightly higher consumption was recorded for the first time in many quarters, especially for food and beverage. Remains to be seen if this represents strong trend for upcoming month. The figures are similar to residential pattern. Positive year-over-year growth rate during July and August, then decreasing in September. Finally, the electricity trade balance resulted in a net import situation during the whole quarter, with the peak in August. We now go to slide 9, to our key operating indicators for the quarter. We can see that electricity generated by Central Puerto diminished 1% to 5,685 gigawatt hour compared to 5,721 gigawatt hour in the third quarter of 2023. Hydro energy generation from Piedra del Aguila dropped 35% reaching 1,405 GWh from 2,151 GWh in the third quarter of 2023. This decline was primarily due to a 55% reduction in water levels of the Koshongura River, which resulted in lower water available for generation. Wind generation decreased 4%, reaching 386 GWh in the third quarter of 2024, compared to 404 GWh in the same period of 2023. This decline is mostly explained by lower wind resource and also to some extraordinary maintenance works, including those performed in several blades of La Castellana II. On the other hand, solar energy generation reached 61 gigawatt hour in the third quarter of 2024, as a result of the full impact of Waniswil solar farm during the quarter, since it was acquired in October of 2023. Thermal generation increased 21% during the third quarter of 2024, compared to the third quarter of 2023. reaching 3,832 GWh from 3,166 GWh recorded during the third quarter of 2023. The growth was mainly due to higher dispatch of some units at Porto site and higher availability and dispatch at Costanera site. Co-generation units in Luján de Cuyo and Brigadier López open cycle also had higher availability and dispatch. Finally, as you can see, availability figures remain strong for the whole group for the quarter, both against the market average and against Central Puerto Aún metrics when compared to the third quarter of 2023. Special mention deserves the performance of Central Costanera. which availability figures have been improving constantly since Central Puertos took over. This is a consequence of several deep maintenance programs, changes in the operations, and the efficiency gains with the merger. Now let's move to our revenues breakdown. As you can see on slide 10, This amounted to $185 million in the quarter, as compared to $162 million in the same period of 2023. The variation in revenues is a consequence mainly of an 11% or $9 million increase in spot market revenues, driven mainly by Spot remuneration increases that were higher than currency devaluation during the period under analysis. Higher thermal generation, especially in Brigadier López, Puerto and Costanera sites. Higher availability of some thermal units, especially in Costanera and Brigadier López. And a non-cash effect on the gap between currency devaluation and inflation. Remember that, as we stated at the beginning of this presentation, this is due to the company's accounting methodology, which includes the inflation adjustment mechanism and the conversion of figures into dollars using the end of the period official exchange rate. Also, in the revenues variation during the period, we should mention a 12% or $8 million increase in sales under contract, mostly driven by the solar farm acquired on October of last year, higher availability and energy sales of cogeneration units, Luján de Cuyo and San Lorenzo plants, and the so-called non-cash effect on the gap between currency devaluation and inflation. This was all partially offset by lower wind generation, mainly due to the extraordinary maintenance in some places of La Castellana II, as we previously mentioned. Finally, we had a 41% or $3 million increase in steam sales, driven by higher steam production in both Luján de Cuyo and San Lorenzo facilities, as a consequence of higher demand from clients in both places. We expect that steam demand will continue to be higher in the future, showing a new trend due to new economic activity levels in some industries, remarkably in oil and gas. On slide 11, we can see the dynamic of our adjusted EVTA. During the third quarter of 2024, the group's adjusted EBITDA amounted to $93 million, remaining almost flat when compared to the third quarter 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 spot sales and sales under contract. Spot remuneration increases higher than the currency devaluation and a positive non-cash effect on the gap between currency devaluation and inflation. Then a 24% or $17 million increase in cost of sales explained basically by insurance and compensation to employees being both mostly explained by the real appreciation of the Argentine peso. On the other hand, production costs were also negatively impacted by a non-cash effect on the gap between currency devaluation and inflation. SG&A rose 20% or $3 million, mainly by fees and compensation for services related to one-time projects and compensation to employees being both mostly impacted by the real appreciation of the Argentine peso. Similar to production cost, SG&A were also negatively impacted by a non-cash effect due to the gap between currency devaluation and inflation. Finally, Other operating results net in the third quarter of 2024 were lower than the third quarter of 2023 figures by 23%, or $3 million, basically as a consequence of lower interest from clients due to lower commercial delays and lower positive FX difference. Also, other operating results net were negatively impacted by a non-cash effect on the gap between currency devaluation and inflation. Moving to the next slide, the consolidated net income. During the third quarter of 2024, Central Puerto's net income amounted to $40 million, jumping 100% or $20 million on a year-over-year basis. The net income was positively impacted by non-cash effects, including better results generated by the change in purchasing power of the currency because of lower inflation and lower DNA. These items were partially offset by lower FONI FX difference and interest. Net income was also positively impacted by the adjusted EBITDA and the net financial results, which were driven by lower FX difference on financial liabilities, lower bank commissions, and higher share of the profit of associates. Finally, income tax was higher due to higher income before tax. Lastly, on slide 13, we have the cash flow dynamic during the nine months of 2024. Net cash provided by operating activities amounted to $184 million. This amount is mainly explained by higher income before income tax for the period, interest earned from clients, and insurance recovery. being all partially offset by tax payments. Net cash used by investment activities amounted to $119 million. This amount is mainly explained by the capex allocated to San Carlos and Brigadier Lopez projects, and the acquisition of financial assets, being all partially offset by dividends collected and the sale of financial assets. Finally, financing cash flow was negative in $78 billion. This is basically the results of long-term, long repayments and interest payments, dividends payments, being all partially offset by bank and investment accounts overdraft net and long-term loan disbursements. Consequently, our cash position as of September 30th of 2024 amounted to $7 million. If financial assets are included, our total current liquidity position amounts to $245 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.

Thank you very much for the presentation. Our first question comes from Marcin Arancet from Balance. Please, Mr. Marcin, your microphone's open.