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

Good morning, ladies and gentlemen, and thank you for joining. At this time, we would like to welcome everyone to Ederner's first quarter 2023 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 the Adenauer's management and on information currently available to the company. 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 forward-looking statements. Now I'll turn the conference over to Mr. Herman Ralf, CFO of Edenor. Thank you.

Good morning, everyone, and thank you for joining. Welcome to the North Earnings webcast for the first quarter 2023. 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. In order to continue to guarantee the electric distribution services to all its 3.2 million customers, which represent a population of approximately 11 million people, our mission is to provide a social, responsible electricity distribution service. leading the energy transition that contributes to improve people's quality of life, business and community development, as well that of our employees, bondholders and shareholders. We are committed to our community, which is why we have adopted the best environmental, social and governance practices. First of all, we will focus on the highlights. Enor has exceeded the investment levels of the previous quarter by 82% as a result of the company was able to maintain its quality of services for all its clients, which shows a record results in our customer perception of services quality. This was part of our summer plan implemented for our network in service. reaching our best historical records in our key indicators, SAIRI and SAIFI, representing the duration and frequency of energy cuts. At the closing of the first quarter, shown an improvement of 19% and 13% compared to the same period of the last year, and extreme below the requirements applied by the regulatory entity. But increases after the hearing held on January 11th 2023. Enri authorized an increase in VAT in two tranches, being 108% as of April 1st. This has been implemented already, and Edenor is collecting these revenues. An additional 74% from June 1st, 2023. Resolution 241-23. Start of the RTI process. End Resolution No. 363 of 2023 approved to start the process as of January 1st. The ENRI will prepare the guidelines on the development schedules that will govern the process. It will convene public hearings to evaluate distribution and transporters' proposals and to listen to the interest sector's opinions. It will carry out the technical economical assessment necessary to specify for the five-year period 2024-2028, the service quality parameters, the adjustments of current procedures and regulations, and the investments to be done by the concession companies. Winter season energy resolutions. Resolution number 323 of 2023. Approved the winter season schedule for the MEM submitted by CAMESA for the first period between May 1st, 2023 and October 3rd, 2023. Regarding our corporate debt, additional senior notes class two were issued on March seven for $30 million hard dollars maturing in November, 2024. We would like to thank you our bondholders and investors for trust in our company, considering that the company received orders for more than $50 million for the last issues. Regarding rating, there is a summary of our rating agencies. In March 2023, FIX maintained the long-term issue rating and that of the existing bond A-, improving the negative outlook to stable, giving the downgrade of Argentina's country rating S&P global ratings, downgraded Argentina long-term foreign currency rating from CC+, to CC-. At the same time, the rating in the national scale was lowered by BB- to CCC with a negative trend. In May 2023, Moody's local Argentina confirmed the BBB. Our Argentine rating changes the negative outlook to stable. The gross margin corresponding to the first quarter of 2023 was 19,319 million pesos, which represents a fall of 24% compared to the same period of the year. This is mainly due to a tariff delay in an inflationary context, partially offset by the volumes levels of the energy, which were increased due to record temperatures registered in the first quarter of this year, especially during March. On February 28, 2023, as mentioned, the NRA approved the new tariff scheme being 108% as of April 1 and an additional 74% for June 1 of 2023. EBITDA showed a decrease of 7,890 million pesos, reaching a negative result of 5,175 million pesos in the first quarter of 2023. This fall is mainly explained by the tariff freeze offset by an improvement in energy losses and a higher operating cost. The new tariff approved on February 28 applied only in April and June of 2023. Energy sales evolution. The volume of energy sales increased by 16%, reaching 6,480 gigas in the first quarter of 2023, against 5,470 gigawatts for the same period of 2022 due to the record of temperatures. Furthermore, our customer base rose by 1% compared to the same period of the previous year, reaching more than 3.2 million customers, mainly on account of the increase in residential customers and small commercials as a result of the market discipline actions and the installation over the last year of more than 565 integrated energy meters that were mainly intended for the realization of clandestine connections. Financial results were a loss of 34,826 million pesos for the first quarter of 2023, increasing its losses by 73%. This difference is mainly due to the higher interest accrued on the debt incurred with Camisa, which as a result of March 31, 2023, accumulated an overdue principal balance of 70,533 million pesos plus interest and in the amount of 111,597 million pesos. It is important to highlight that CAMESA invoices due on March and April 2023 were paid in full, so not generating new debt with CAMESA. As explained before, an agreement with CAMESA was signed on December 2023 and the remaining balance of 38,650 million pesos will be cancelled in 96 installments for six months of grace period and at an interest rate of 50% of the market interest rate. Net income decreases by 51%, reaching losses for 9,961 million pesos in the first quarter of 2023, against 500, 757 million pesos for the same period in 2022. There was a higher loss in the operating income, higher financial charges due to deferral of the payment of obligations with the wholesale electricity market and a higher positive result for exposures to change in purchasing power. Capital expenditures. During the first three months of 2023, our capital expenditure totalizes to 9,986 million pesos against 5,448 million pesos in 2022, an increase of 92% in real terms compared to the same period of the previous years. The higher investments were in the line of our summer plan to improve our services and network reliability. Investments in the first quarter of 2023 were as follows. 7,956 million pesos in electricity-related activities. 682 million pesos in systems and others, and 1,346 million pesos in project staff cost. In order to meet demand, improve services quality, and reduce non-technical losses, most of the investments were assigned to the increase in capacity installations of remote control equipments and medium voltage network, connections of new suppliers, and installations of self-managing energy meters. All investments are made prioritizing the protect the environmental and safety of our public roads. Energy losses. In the first quarter of 2023, energy losses experienced a 16% decrease against 13.8% for the same period of the previous years. The works of multidisciplinary teams to develop new solutions to energy losses continues, as well as a market discipline DIME actions aiming to reduce them. Analytical and artificial intelligence tools were used to enhance effectiveness in the routing of inspections, and DEMA actions continued with the objective of detecting and normalizing irregular connections, fraud, and energy theft. In addition, during the first period, January to March 2023, 79,433 inspections of Tariff 1 were conducted with a 50% efficiency, while the same period of the previous year's 780,333 inspections have been conducted with 54% efficiency. More than 565 integrated meters were installed during 2023. Regarding the recovery of energy, besides the normalization of customers with media meters, 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 micro-balances in private neighborhoods. In all cases, a rate of recidivism in fraud has been observed. To conclude, let me summarize the principal events occurred since the change of control. On June 30th, 2023, Edelkos acquired the control of Edenor. In July 2021, consent for the changes of control acceleration clause was reached successfully. Between April and October 2021, the bond of $98 million was exchanged and canceled, issuing a new bond of $55 million due in May 2025, and listed in BIME and as a social bond. On September 2022, a new issue of Class B notes for $30 million issued in 1975 Argentine law is due in November 2024. As a result of the debt has been clarified all the maturities horizon for the coming years. By the year end, we reach our best historical records in services quality regarding frequency and duration of power outages, as well as customer satisfaction index. We also signed the agreement to cancel and compensate credits with CAMESA according to the law approved by the Congress, with the remaining debt to be paid in installments as explained below. Recently, the new tariff approval will help to reach a path of normalization of the sector. Finally, last March 7, the company issued an additional $30 million bond outstanding, receiving orders for more than $50 million. All of the above show our management KPIs reaching as well as a look to give again trust to our investors and bondholders. This concludes my review on Edanon, and I would like to thank you for your support, shows by our investors and bondholders, and your interest in participating today. We are now open for questions through our chat.