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

On behalf of EDNR, we would like to thank everybody for participating in this conference call to discuss the result of the third quarter ended September 30, 2024. We will also highlight important recent development advances in our efforts to strengthen our position as an R&D leader. If you would like to receive our early release or presentation, you can download them easily from the investor relations section or our website located at www.ednr.com. or contact the investor relations team to request a document. This event is being reported. After the company's memorials are completed, there will be a question-and-answer session for which you make some new questions through the webcast chat. Before proceeding, let me mention that forward-looking statements are based on the belief and assumptions added in our 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 will also affect the future results of Aeternor and could cause results to differ materially from those expressed in such forward-looking statements. Now, let me pass the call to Germán Raftel, our CFO, who will guide us through the presentation.

Thank you, Solange. Good morning and welcome to everyone. Your presence here is very important to us, and we hope to provide you with a good understanding of A&R performance during the third quarter of 2024. Agenda, highlights, regulatory framework, financial results, operating indicators, financial debt, and final remarks. Relevant events. Before moving to the discussions of our performance, financial performance for the third quarter, I would like to share with you the video that we just presented, that we received the award of the ACON as part of our energy efficiency campaign. The ACON awards are the first Argentine recognition honoring the work of communicators, communication specialists, public relations professionals, journalists, and other organizers. Additionally, I would like to take a few moments to highlight some important recent developments. Results from the third quarter and the first nine months of the year reflected an impact of the transition tariff increase and operations and financial improvements. EBITDA for the first nine months resulted in a profit of 134.3 billion pesos as part of the result of the tariff recomposition that was implemented in the previous. A significant adjustment was received in February. It was being followed with monthly adjustments since August as part of the government's plans to fully normalized tariffs, 3% in August, 3% in September, 2.7% in October, and 6% in November. These increases have restored the financial equilibrium of the company. The five-year tariff review process has advanced significantly. This will define tariffs for 2025 to 2029 and should further enhance our financial performance and increase our opportunities for growth. New authorities in the Secretary of Energy and ENRE were recently appointed. New authorities remain committed to the process. Some small delays could occur, but should not significantly affect the actual process. Two weeks ago, we issued an international $184 million equivalent in Class VII shares, with a final maturity of six years, with amortization starting in year four, 33.33%, year five 33.33% and year six 33.34%. Resulting in a five year average life as a coupon of 975. Enor is proud to have been back to the international markets. This follows the issuance of $124 million equivalent in class three, four and five and six during the previous quarters of 2024. Together with this, we have a substantial improvement in our debt profile. As far as our rating agencies' concerns for our international debt, Fitch and Standard & Poor's rated the Class 7 shares CCC Plus and CCC, respectively. On the domestic side, Moody's Local Argentine raised its rating from BBB to A, and in the case of Standard & Poor's global ratings, ratifies the rating of RIB and raised the outlook from stable to positive. Events at the company and in Argentina are moving forward in a favorable fashion, and we expect this to increase our quality performance and contribute to more favorable financial results going forward. This will also enable us to continue our strong investment program and further improve our service quality. Regulatory framework. The national government continues to move forward on the regulatory front and clear objectives to normalize and deregulate the energy sector. The large 329.2% transition tariff increase that was effective on February 16, 2024 has been followed up by monthly increases, 3% in August and September, 2.7% in October, and 6% in November. The past increases have contributed to the large improvement in EBITDA and operating margin that we have been seeing in the recent quarters. The ongoing adjustments should help us to maintain strong business momentum. The five-year tariff review process 2025 to 2029 is actively moving forward, as mentioned. The completion of the process helps us to further enhance confidence and regulatory environment. The company has been paying its energy purchase costs to Kamesa on schedule since April, and it has been paying on schedule the rescheduled payments for the past debt with Kamesa. Additionally, it's now setting a payment plan for additional debts that remains with Kamesa. This is an important discussion that is expected to be included as part of the five-year target review process. Now let's look at our financial results. Revenues. As you can see on slide 10, Sales rose 30% year to year in the third quarter of 2024 in constant currency to 555.8 billion pesos, partially offset by a lower volume, 1.6% in the third quarter of 2024. Sales growth respectively, primarily the impact of the tariff adjustment, which we just mentioned. As a positive operating result, year to year has been reported mainly due to improvement in sales and maintaining the operating expenses at same levels as last year. Net result increases 44% compared year to year. Energy sales evolution. Adenos client base reaches 3.3 million clients, 1% higher than the third quarter of 2023, which was mainly due to an increase in residential and industrial clients. Contributing to the increase were continuing efforts to improve market transparency and discipline. In the quarter, we installed a total of 4,862 energy meters to help convert informal clients into full participants in the electric distribution system. Sales volume in the third quarter of 2024 totaled to 6,005 gigas, which has been down 1.6% versus the third quarter of 2023, primarily related to the effect of a small decrease in demand on commercial and industrial segments in the previous. As far as collectivity is concerned, it should be highlighted that it remains strong and at healthy levels. Collectivity remains solid. It was 94.97% for the first third quarter. Continuing the improvement in performance of the third quarter have a better collectivity ratio compared to the second quarter, which in turn was better than the first. Distribution margin. The distribution margin for the nine-month rose 53% to 608.4 billion pesos. And for the first quarter, we saw a 22% year-to-year raise to 211.1 billion pesos. These large increases are largely a result of the tariff increases mentioned, which were partially offset by the effect of lower sales volume, 4% lower, and a higher purchase energy cost due to the reduction of subsidies in N2 and N3 segments. EBITDA. The third quarter EBITDA was 45.7 billion pesos. Last year, third quarter of 2023, EBITDA included a positive effect due to arrangements of the payment plans that we have with CAMESA. For the energy costs, absent these adjustments, the year-to-year EBITDA comparison shows a major improvement. The principal factors driven the third quarter 2024 EBITDA were the positive impact of the higher tariff increases in February of this year, and the monthly adjustment implemented in August and September, 3% each month, as well as the reduction in energy losses to 15% in the third quarter of 2024 versus 15.3% in the third quarter of 2023. Additional results were impacted by the increase in energy purchases due to the reduction of subsidies by establishing limits of 250 kilowatts in N3 customers and 350 kilowatts in N2 customers. In the case of residential customers as of September, N2 low income level clients and N3 middle income level clients have the consumption cap described below with the subsidies energy prices. N2 low income up to 350 kilowatts per month with a 75% reduction of the total real energy prices. And three, middle income segment up to 250 kilowatts per month with a 60% reduction of the total real energy prices. Consumption above that limit for N2 and N3 pay the 62,838 pesos per megawatt as N1. as explained above. Net financial expenses. Financial results show an important swing from the net expenses in the same period at last year to a positive 36.9 billion pesos in the third quarter of 2024. The improvement was partially a result of lower interest payments related to outstanding amounts owned to CAMESA. An important reduction in financial expenses of 39% that represents 56% million pesos of this year. No, sorry, 56 billion. 56 million pesos, sorry. Net results. The net income for the third quarter of 144 billion pesos compared to the earnings in the prior period of 234 billion pesos Excluded Camisa effect registered in 2023 year-to-year. Results show a major improvement because of the tariff increases that we received in February. CapEx. For the nine-month period ending September 30, the North's capital expenditures were 245.3 billion pesos, which was up 30% with the same period last year. Our investment program spending allocations is made to fulfill our commitment to meet raising demands, further improve service quality, and reduce non-technical losses. Now, looking at our operating indicators. Energy losses. We achieved an important reduction in energy losses reaching 15.04% due to a down from 15.3% last year. This underscores our continuous efforts to find solutions to this challenge. Our multidisciplinary teams are constantly focusing on finding innovations ways to combat energy losses. These efforts are complemented with our market discipline initiatives that are aimed at curbing inefficiencies and irregularities. Also, analytical tools powered by artificial intelligence have improved inspections efficiency. and our market discipline actions continue to detect and rectify irregular connections. It is important to remember that of the 15% total losses, a full 9.66% are losses recognized by the regulatory in our tariff as technical losses. Quality of service. As mentioned early, our investment plan is continue to contribute to improve in service quality by reducing the duration and frequency of outages, which have been on downward path since 2014. These levels are and have been comfortable exceeding the levels required by the regulatory entity. At the end of the third quarter of 2024, the CIDI and CIFI indicators show a 9.4% hours duration of outages and a 3.8 average outages per client, respectively in the period. The evolution of these indicators in the third quarter shows a different trend due to both forced service interruptions and scheduled outages. Regarding the latter, the increase is significant because of an important maintenance task in important projects that were carried out in many municipalities, impacting the current values of outages and durations. aimed to improve the quality of services provided by our company. The main investment plan has been focused on implementing improvements in operating process and the adoption of technologies applied to the operations and management of the network. Financial debt. Last October, as we said before, we completed an international issue of $184 million, of which $135 million was new money with the remaining 49% of an exchange of Class I debt. The issuance marked the company's successful return to the international market more than 12 years after its last placement. Edenor improved the credit profile in international markets, allowing this placement to have a 9.75% coupon with a total terms of six years and a partial amortization in years four of 33.3%, year five, 33.3, and year six, 33.34%. The company proactively seeks to extend its debt profile to 2030 and improve its short-term liquidity position, which was remarked as very positive for a great perspective for or the rating agencies. This follows the issuance of $100 million in class five and six at very attractive interest rates. Indebtedness. With the improvement in our risk profile due to important changes in the regulatory front, the three rating agencies that cover us, Standard & Poor's, Fix and Moody's, each made positive moves related to our debt early this year. Moody's Argentina, as well as Standard & Poor's Global, made a further adjustment last week. In the case of Moody's Argentina, they have raised the domestic debt rating of Edenor for a notch from BBB plus to A. In the case of Standard & Poor's Global, this week they improved the outlook from stable to positive. as from the international listing, Fitch and Standard & Poor's rated the Class VII notes, CCC+, and CCC, respectively. We view these changes as a very positive signal. Maturity schedule. In these slides, you can see the maturity schedules of the debt as of September 30th. But looking into the pro forma maturity schedule in the next slides, while in the slides you can see the maturity scale as of September and pro forma basis, considering the recent transaction we issued in $184 million in Class VII shares. Closing remarks, final remarks. To close, I would like to reiterate the several key points shown in slide 25 that are the following. We remain focused on future transformation growth and opportunities as we take advantage of opportunities to benefit from the energy transition in our distribution business and potential growth opportunities in other segments like energy generation and critical minerals. We are an industry leader in Argentina with 20% market share in the electricity distribution market. The completion of the five-year tariff review process should continue to result in material improvements in EBITDA and net income, as well to keep making investments to further improve the quality of service, as we continue to transform smart grid with technology and innovation. In the short term, we are very excited about our growth opportunities over both the near to medium term, as well as the long-term outlook to share this growth with our shareholders and one-holders. We are continuously focused on ways to further enhance our distribution business to benefit from challenges of energy transition and also to broader our scope of business opportunities. This could include investments in renewals and conventional energy generation, storage and non-regulatory business such as critical minerals and acquisitions. With this now, we would like to open to the call for questions. And to ask your questions, please send the written questions to the IR and the INR through the questions and answers menu. Identify yourself and stating that you have a question. We thank you all for your support, your engagement as a shareholder and bondholder.

Hello. So the first question came from Gustavo Faria. Yes. Can you provide additional details on the timing of the full tariff review in the next month? After the postponement of the public hearing, when do you think the government will release the next date? What are the key steps after the public hearing, publication of the asset base, regulatory bid, and the new tariffs?

The answer is going to be we still have the final maturity to have the final report, to present the final report on November 20th. But as there are new members, as the Secretary of Energy has changed and they are changing the intervention of the regulatory entity, we We expect that there's going to be some small delays, but we don't have the real dates when that's going to happen. But we are expecting to have this close within the end of this year or beginning of next year at the latest.

A question from Gustavo is, what was the main reason for the little uptick in the energy losses? 15% in third quarter 24 versus 14.5 in first quarter 23 and shady indexes. 9.4 in third quarter 24 versus 8.7 in second quarter 24. It was more linked to the weather temperatures. We expect additional compensation for non-technical losses in the new tariff from the full tariff review.

The main reason of the changes in energy losses was the price of energy that has increased due to the reduction of subsidies. Just for you to take an example, in the third quarter of 2023.

And one, two, 17,645.

So it has been more than six times was the price of the electricity that has been considered in the adjustment compared to last year with this year.

So we have one more question is related to what are your plans for possible new debt issuance once the five-year term review is completed?

Okay, we expect to outlook for the company to improve the tariff process that is completed. Whatever the outcome, it should be provided great feasibility of the cash flow and generation of the company and more confident in the regulatory environment. So we are always monitoring the market conditions. And should market conditions in the future allow us to issue, we will reopen the last issuance that we did in this October, the $184 million that we have, 144 regas transaction. This could include the reopening of that instrument.

Sorry.

We have two further questions. One, it says, the company has total losses of 14.9% versus 9.67% recognized in the current RDI. Should we expect the new revision process to bring goals achievable by the company so that you can get to the agreed cost of capital in the work?

We are requesting in our process that we have with the regulatory entity, we are requesting an additional consideration of the regulatory entity that increases the technical losses. So we have a less gap between the total losses and the non-technical losses. So because we consider that part of the losses we have that are today non-technical should be technical losses because we cannot improve the quality of service in that specific area.

And the last question we have is from Guido. He says, regarding the penalties from the absence and recharges in third quarter 24 of first 14,478 million pesos or 62,325 million for the nine months. How much of that charge was already paid? Would you consider adding those charges to the adjusted EBITDA calculation some years before?

No, we haven't done the calculations. We haven't done any adjusted EBITDA. But this increase is mainly due to the reduction of subsidies that the government is implementing. So as we said, the kilowatt has grown more than six times since the last quarter of 2023 to the last quarter of this year. So the main reason of that increase is the megawatts increase. There are no more questions, so thanks very much for participating in our conference call. Please do not hesitate to contact our investor relations department. and further inquiries that you may have. Good morning to everybody and have a nice day. Thank you.