Empresa Distribuidora Y Comercializadora Norte S.A. (Edenor) American Depositary Shares

Good afternoon, ladies and gentlemen, and thank you for joining. At this time, we would like to welcome everyone to LNR's 2Q2022 Earnings Conference Call. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the presentation. After the company's remarks are completed, there will be a question and answer section through the webcast chat. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Senors Management and on information currently available to the companies. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Edenor and could cause results to differ materially from those expressed in such forelook and statements. Now I'll turn the conference over to Mr. Herman Glantz, CFO of Edenor. Thank you.

Good morning everyone and thank you for joining. Welcome to Edenor Earnings webcast for the second quarter 2022. As you know, you can always call any member of our team for more details on the results of the period or any doubts you may have. First, we will focus on the highlights. Edenor continues to guarantee the electricity distribution services to all its 3.2 million customers, which represents a population of approximately 11 million people. Our mission is to provide a socially responsible electricity distribution service, leading the energy transition that contributes to improve people's quality of life, business and community development, as well as to our employees, bondholders and shareholders. We are committed to our community, which is why we have adopted the best environmental, social and governmental practices. Edenor was able to maintain its quality services for all its clients. The key indicators, SAIDI and SAIFI, represent the duration and frequency of energy cuts for the last three months, shown and improved of 16% and 8% compared to the same periods of the last year. Revenues from sales were 6% lower than second quarter of 2022 in real terms, mainly due to the inflation differences and the tariff that has been frozen. Enor was able to refinance its financial debt and the new issue of $52 million has been rated as a social bond according to Fitch, Argentina. As of June 1, 2022, it applies the updated of the seasonal prices of energy and instructed A&R to carry out the corresponding adjustment of the tariff table. The rates had an average increase which represents to a tariff rates table of 14% in residential category and 15% in general category. This has not been any adjustment for the value-added distribution service. As of June 2022, a subsidy segmentation regime for residential users of electricity and gas public services with the aim of achieving reasonable energy values that can be applied with criteria of justice and distributive equity. The segmentation system is made up of the following levels level 1 higher income level 2 lower income and level 3 average income users that integrated levels 2 and 3 will not have new increases in bills for the year 2022 while those included in the levels 1 segmented will pay the full cost gradually and it's by monthly third so at the end of the current years are paying the full cost of an energy bill to them. Ratings. In May 2022, great rating agencies Standard & Poor's and Moody's updated Adenos ratings. Standard & Poor's Global confirmed the institutional rating of the company as well as the rating of the global program of the corporate bond for up to $750 million. And a class 9th senior notes rated CCC+, changing the credit watch from special review with positive implications to special review with development implications. Moody's local Argentine lowered the classification of Class 9 senior notes to BB+, Argentine rating, maintaining the downward preview. First quarter results. The gross margin accumulated as of 30th of June 2022 was of 24,212 million pesos, which represents a fall of 16% compared to the same period of the previous years, mainly due to the tariff freeze. The ENRE established a new tariff scheme which are effective as of March 1st, setting a bad increase of 8%. EBITDA decreases to a loss of 5,503 million pesos, mainly due to the increase in operating costs and increase in unrecognized losses and seasonal prices that were not proportionally to the increases in the BAT. The value of energy sales increases by 8.3%, reaching 5919 gigas in the second quarter of 2022 against 500 463 gigas gigawatts for the same period of 2021. Furthermore in our customer space rose by 2.1% compared to the same period of the previous years reaching more than 3.2 million of customers mainly on account of the increases in residential customers and small commercials as a result of the market discipline actions and the installation over the last year of more than 6416 integrated energy meters that were mainly intended for the regularization of clandestine connections. Financial results were a loss of 25,637 million pesos during the first six months, which represents an increase of 64%. This difference is mainly due to the higher interest accrued and the debt incurred with CAMESA. As of June 30th, the overdue principal balance accumulated is 38,937 million plus interest and penalties. Net results recorded a loss of 6,549 million pesos, a 63% lower losses recorded in the second quarter of 2021. There was a higher loss in the operating income and a higher financial charge due to deferral of the payment of obligations with the wholesale electricity market, offset by a higher positive result for exposures to change in the purchasing power. Capital expenditures. During the first six months of 2022, Evenor's capital expenditures totaled 8,655 million pesos against 10,131 million pesos in the same period in 2021, with a decrease in 15% in real terms, but still maintaining its quality services for all its clients. Investments for the period were as follows. 674 million pesos in new connections. 1,638 million pesos in grid enhancement. 1,329 million pesos in maintenance. 52 million pesos in legal requirements. 217 million pesos in communication and telecontrol, and 582 million pesos in other investment projects. Service quality standards. Quality standards are measured based on the duration and frequency of service outages using SAIDI and SAFI indicators. SAIDI refers to the duration on outages and measures the number of outages hours a user experience per year, and SAIFI refers to the frequency of outages and measures the number of times a user experience an outage during a year. At the closing of the second quarter of 2022, SAIDI and SAFI indicators for the last three months were 10 hours and four outages on average per client per year. evidencing a 16 and an 8% improvement respectively, compared to the same periods of the previous year. This recovery in services levels is mainly due to the investment plan devices by the company since 2014. The different improvements implemented in the operating process and the adoption of technologies applies to the grid operations and management. This number of SAIRI and SAIFI indicators are the lowest that the company has been had in all its history. Energy losses. In second quarter of 2022, energy losses experienced a 17.6% decrease and against 18.3% for the same period of the previous years. The work of multidisciplinary teams to develop new solutions to energy losses continued, as well as market discipline actions aiming to reduce them. Analytical and artificial intelligence tools were used to enhance effectiveness in the routing of inspections. And DMA actions continues with the objective of detecting and normalizing irregular connections, fraud, and energy theft. In addition, during the three-month period April-June to June 2022, 82,058 inspections of Tariff 1 residential and general uses were conducted. with a 60.6% efficiency, while for the same period of the previous years, 148,178 inspections have been conducted with a 52.2% efficiency. Moreover, 6,416 integrated energy meters were installed during this first six months of 2022. Regarding the recovery of energy, besides the normalization of customers with millimeters, clandestine customers with conventional meters were also put back to normal. Moreover, a new energy balance system was implemented, as well as the development of microbalances in private neighborhoods. In all cases, a rate of recidivism and fraud has been observed. Finally, this concludes my review on Edenor and I would like to thank you the support shown by our investors and our bondholders and your interest in participating today. We are open now for questions through our chat. Thank you very much.

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