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

Good morning on behalf of Evenor. We would like to thank everybody for participating in this conference call to discuss the results of the first quarter ended March 31st, 2024. We will also highlight important recent developments and advances in our efforts to strengthen our position as an energy leader. If you would like to receive our earlier release or presentation, you can download them easily from the investment relations section of our website located at www.edenor.com, or contact our investor relations team to request a document. This event is being recorded. After the company's remarks are completed, there will be a question and answer session for which you may submit questions through one fast chat. Before proceeding, let me mention that overlooking statements are based on the belief and assumption of EDNO's management and on information currently available to the company. They involve risks, uncertainty, 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 would also help the future research of Adenauer and would cause research to differ materially from those expressed in such formal events. Now, let me pass the ball to Germán Rapsel, our CFO, who will guide us through the presentation.

Thank you, Solange. Good morning to everybody and welcome to this conference. Your presence here is very important to us. and I hope to provide you with a good understanding of E&R performance during the first quarter of 2024. The agenda is the highlights regulatory framework. Highlights, relevant events. Before moving to the discussion of our financial performance during the first quarter of 2024, I would like to take a few minutes to highlight some very relevant positive recent developments as shown in our slide number five. These have substantially improved our financial outlook and enabled us to focus on further transformation of the company. The positive and relevant events took place on four fronts. One, the regulatory side. New tariffs became effective on February 16 and are reflected since then in our first quarter 2024 results. The improvement in tariffs has restored the economic equilibrium of LNO. For the first time in many years, the auditor's comments do not include a concern about the companies continuing to operate as a going concern. We also continue to work together with the regulatory on our advisors on the five years full tariff review. Related to our capital structure, our debt profile and capital structure have improved notably post the exchange and issuance of $124 million in Class III and Class IV notes during the first quarter. Related to the credit profile, the events just mentioned contributed to an improvement in our debt credit ratings from Standard & Poor's, FIGS, and Moody's. Each of the rating agencies raises its outlook on Edenor's debt. And finally, at the shareholders meeting that has been held on April 25 of 2024, shareholders approved the change in our corporate purpose, including in our bios that will enable us to venture into a new business link to the energy transition. We expect all these events highlighted here will lead to a more dynamic company and will substantially more favorable financial results going forward. This will also enable us to continue our strong investment program and further improve our service level. Regulatory framework. With the recent changes in government, the activity on regulatory front has become more active. As you know, the new tariffs were approved and became effective as of February 16, 2024. which reestablish the economic equilibrium of the company as reflected in the independent auditor's opinion. The government is also studying ways to make changes to the subsidies program. As mentioned, we continue to work together with our advisors and the regulator to advance on a five-year full tariff review expected as planned to be completed by year end in 2024. Resolution of the Secretary of Energy 5824 and modifications instructed CAMESA to establish the amounts owed by the distributors so as to agree how to cancel them, including a planned payment. Integral Tariff Review Process. This is the new schedule recently approved by the regulatory entity, ENRE, on May 8th. With the detailed steps necessary to complete as planned, the five-year target review by the year end 2024. We are working with our external advisors and the regulator has chosen theirs in order to achieve this goal. Integral target review process. The process involves a series of objectives needed to define the key variables that will be used by the regulator to determine the final target. It is important to mention that the ENRE, the regulatory entity, has created a working group for smart grid and smart meters process. Amendment of the bylaws, new activities in the corporate purpose. Our move to change our corporate purpose in our bylaws is consistent with our goal to transform the company and transition From its current strong position as a leading electricity distribution company in Argentina into a broader energy company. In our distribution business, we continue to work to develop and expand the smart grid using technologies and innovation. Now, the buy-loss changes will all allow us, the company, to participate in investment in broader range business. This includes the generation of both renewal and conventional electricity energy, plus critical minerals, particularly those in great demand in the energy transition. The bylaws were also amended to incorporate digitalization and artificial intelligence, where this can be applied to further our corporate purpose. These changes, which are in line with the incipient deregulation process in the economy in Argentina, with the national government has announced and will undertake and include the energy sector. We expect this to be positive for the shareholders' returns. Now, let's turn to slide 11 to discuss our financial performance for the first quarter of 2024. Financial results. Revenues. As you can see on slide 12, revenues rose 2% in real terms in the first quarter of 2024 676 billion pesos versus 270.8 billion pesos the prior year. Two key factors drove the sales performance. First, sales were positively impacted by the tariff increases that is in place since February 16, 2024. And the second was the volume softened year to year due to a lower temperature in the first quarter against the right. the record high temperatures that we saw during the first quarter of 2023. I would highlight again that the tariff increases that were put in place are being built to clients and collected from clients since February 16. Energy sales evolution. In the first quarter of 2024, energy sales evolution declined 7.8% year-to-year to 5,981 gigas, led by an 11.1 drop in demand by residential customers, mainly because of unusually high demand during the heat wave in the first quarter of 2023, with extreme temperatures growth peak consumption volumes. And our customer base rose 1% versus the prior year to 3.3 million customers. This was mainly due to an increase in residential and industrial customers because of market discipline measures. including the installation of increased number of energy meters in the first quarter, which were mostly intended to convert clandestine connections into registered customers. Distribution margin. For the first quarter, our distribution margin rose 54% year-to-year to 115.7 million pesos, mainly due to the benefit from the tariff increases implemented in mid-February, particularly for unlowered volumes, which more than offset the effect of net higher energy costs due to reduced subsidies. Ebitda. Looking at the EBITDA for the first quarter of 2024, EBITDA rose sharply in real terms to 0.4 billion pesos versus a loss of 20.1 billion pesos for the same period of last year. The main factor driving the improvements were a positive impact from the tariff adjustment as of February 16, 2024, and a further reduction in energy losses to 14.5% in the first quarter of 2024 versus 15.9% in the first quarter of 2023. It is important to highlight that in March, which was the first completed month that reflected the new VAT tariff, EBITDA totaled around 30 billion pesos. Net financial expenses. Net financial expenses of 214 billion pesos in the first quarter of 2024 were higher than the same period of the previous year 58% higher versus the first quarter, mainly due to higher interest expenses related to higher financial debt post the recent issues. Net results. On the net income line, Elenor reported a net profit of 50.9 billion pesos in the first quarter of 2024 versus a loss of 38.6 billion pesos in the same period of last year. mostly reflecting the better operating results. CAPEX. For the first quarter of 2024, we invested 49.1 billion pesos, which was a 27% increase versus the first quarter of 2023. Our investment program remains strong, reflecting our unwavering commitment to improve service quality, which is evident in the strong improvements that have been achieved in our service indicators. Our investment program spending allocations is made to fulfill our commitment to meet rising demand, further improve service quality, and reduce non-technical losses. We continue to work to transform our network into a smart network by insulating increasing number of remote control points, tailored supervision points, as well as smart meters. This allows us to solve problems that arise in the network remotely and quickly. We have estimated 3,347 remote control points and 2,724 tele-supervision points, as well as 324,000 smart meters. This allows us to solve problems by isolating any part of the system experience a service problem and re-establish service without sending a team physically to the location within a few minutes. We have the ability to restore services to customers when there are interruptions in less than three minutes, 44% of the time, and in less than 15 minutes, 64% of the time. We have also transformed the way in which we relate to our clients. We modernize the service in our commercial offices by cutting-edge technologies and developing Eleanor Digital, a cutting-edge service app. which is already used by more than 2.4 million customers. This allows customers to resolve procedures, make payments, generate electronic bills, or receive from home or from the telephone, optimizing clients' time and reducing the carbon footprint by not traveling to commercial offices or by not printing the invoices, for example. Operating indicators. Energy losses. We achieved an important reduction in energy losses to 14.4% in the first quarter of 2024, down to 15.9% in the last quarter of last year. This underscores our continuing efforts to find solutions to this difficult problem. Our multidisciplinary teams are consistently focusing on finding innovation ways to combat energy losses. These efforts are completed by our market discipline initiatives that are aimed to curbing inefficiencies and irregularities. Also analytical tools powered by artificial intelligence have argument inspection efficiencies in our market discipline accounting continues to detect and rectify irregular connections. It is important to remember that of the 14.5% total losses, 9.7% are technical losses which are recognized by the regulatory in our target. Quality of service. As mentioned earlier, our investment plan is continuing to contribute to improve in service quality. We reduced the duration and frequency of outages, which have been down, sorry, which have been on a downward path since 2014. These levels are and have been comfortable exceeding the levels required by the regulatory. For the first quarter, the CIDI and CIFI service quality indicators show continuous strong performance of 8.6 hours and 3.5 hours average outages per client in the quarter. At a record low level and down 74% and 63% respectively compared to 2014 levels. This recovery in services is mainly due to the strong level of investment that the company has made since then. Investment has been focused on implementing improvements in operational process and the adoption of technical applied to the operations and management of the network. Financial debt. On the first quarter of 2024, E&R completed two no issuance in the local Argentine market for a total amount of $124 million. which enabled us to improve our debt profile and extended the average maturity of our debt. Total capital debt outstanding after the issuance is now $207 million. Maturity schedule. On slide 14, you can see the maturity schedule of the debt as of December 2023 and the debt after the recent transactions in which we issued $124 million in class three and class four notes. Rating agencies. With the improvement in our risk profile due to a large part to important changes in the regulatory front, the three rating agencies that cover us, Standard & Poor's, FIGS and Moody's, each made specific moves related to our debt. So Standard & Poor's and FIGS raised their ratings and Moody's improved their outlook. We view these changes as a very positive signal. Closing remarks. To close, I would like to reiterate that we remain focused on future transformation, now growth opportunities. The change to our corporate purpose in our bylaws will allow us to open the spectrum of growth opportunities to other segments like energy generation, critical minerals, adapting our distribution business to the changes of the energy transition. We are an industrial leader in Argentina with a leading 20% market share in electricity distribution. The tariff changes will lead to material improvements in EBITDA and net income, as well to keep making investments to further improve the quality of service, continue to transform the grid into a smart with technology and innovation. The Integral Charter Review Program is going, as expected, to be completed as planned by year-end 2024. These improvements have restored the economic equilibrium of Edenor. For the first time in many years, the auditors' comments do not include a concern about the company's ability to continue to operate as a going concern. With this, now we would like to open the call to your questions. To ask questions, please send a written message to IR Eleanor through the questions and answers menu, identifying yourself and stating that you have a question. We thank you again for your support and your engagement as shareholders and bondholders.

Okay, thank you very much. So the first question comes from Gustavo Farias from Bank of America. Will the documents of the full tariff review become public in the dates set by the regulator or only the final documents? Will investors have access to the documents based on the timeline?

Unfortunately, only the final documents will be available and will be published for the investors and the community of investors. We can give you some colors within the process, but we cannot release the document.

There will be also a public hearing.

And it's going to be a public hearing to discuss and approve the outcome of the negotiations.

The second question from Gustavo is, could you provide an additional column on how you think the regulator will address the methodology regarding the regulatory work of the debility rate? and net rub, capital base, and dollar devaluation, can we expect a higher regulatory reward versus 2016 tax review given higher spending in Argentina?

That's something also in the process that we are discussing and negotiating with the regulatory entity. So we cannot give you any additional information on that for the moment.

Related to the third question of Gustavo, we saw a good improvement in energy losses in the quarter versus the first quarter 2023. Do you have concerns on the energy losses and the liquidity performance after the higher tariff for the end consumers? How do we evaluate the performance of energy losses and the liquidity for the end consumers in April and May after the increase in tariff perception for the final consumers?

We don't foresee any big increases in the levels of delinquency. We are very well prepared in order to fight against delinquency in that respect. So we don't foresee many changes on what we have done historically.

Thank you, Gustavo. Now we have another question for David Pato from Fuente Hermanos. After the changes in the bylaws, are we already analyzing any specific investments? What further measures could be taken to increase the customer base? What would be the place of these and their impact?

This has been approved just last week, so we haven't done any projections or any projects yet in place in order to discuss the bylaws. What we are thinking and all the things that we will do will be added value for Edenor, of course, and will be in line with the transition changes that we want to do on the company.

Thank you, Amir. Now we have another question from Grant Betty. Last quarter, I think you mentioned there will be monthly tariff updates starting in May based on the polynomial formula. Is that still going to be the case?

We have sent the calculations to the regulatory entity to calculate the new tariff. We have a meeting tomorrow in order to discuss this because there are some possibilities that this is going to be postponed for one month. But it's something that we are discussing actually today, tomorrow with the regulatory entity.

Thank you very much. let's wait if we receive another question okay so uh Then, one additional question we received is, are you planning to go to the market in the near future?

We're going to be prepared and we're going to be ready. If there is a window and there is an opportunity, we will have all our papers in place in order to hit the window if there is a possibility of doing that. There is one more portion. Let us review it, please.

So the last question was received from Grant Betty. It said, will the formula be publicly published?

Yes, the formula has already been published when they published the tariff increase. And we will publish, of course, the number when it's agreed with the regulatory entity. We don't have further questions, so thank you very much for your participation in our quarterly conference call. And thank you, and please do not hesitate to call the Investor Relations Department for any inquiries you may have. Thank you, everybody.