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

Good morning on behalf of EDENOR. We would like to thank everybody for participating in this conference call to discuss the result of first quarter ended March 31st, 2025. We will also highlight important recent developments and advances in our effort to strengthen our position as an energy leader. If you would like to receive our earnings release or presentation, you can download them easily from the investor relations section of our website located at www.edenor.com or contact our investor relations team to request the documents. This event is being recorded. After the company's remark and completed, there will be a question and answer session for which you may submit questions through the webcast chat. Before proceeding, let me mention the forward-looking statements are based on the belief and assumptions of 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, let me pass the call to Hermann 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 Adenauer performance during the first quarter of 2025. Before moving on the discussions on the details of our financial performance, I would like to show you during the first quarter of 2025 all the updates and the news. I would like to take a few minutes to highlight some of the very relevant and positive recent developments shown in slides number 5. First of all, the quarter of 2025 resulted a rose sharply and reflects an impact of a transitory transition increase and operational and financial improvements. The EBITDA for the first quarter of 2025 was 63.2 billion pesos compared to 6.9 billion pesos of last year. which reflects a sharp improvement in our operating results as a consequence of the tariff increases starting with the 319% adjustment of February of 2024 and follow adjustments of average monthly of 4% since August of last year. The five-year tariff review process that has defined the tariff for the next five years 2025 to 2030 is already completed and is notified as of April 30th of this year. Our capital structure has improved with the cancellation of principal and interest and Class IV notes on March 7 of 24.4 billion pesos. In addition, we are today cancelling the remaining principal outstanding of Class 1 notes plus accrued interest for $9 million. Our improved earnings cash flow have allowed us to continue making the necessary investments to maintain and improve the quality of our service, utilizing technology and innovation, and promoting responsible and efficient energy uses. This is reflected in the continued improvements in our SAIDI and SAIFI indicators, which have been reflected in our customer satisfaction. Regulatory Framework The regulatory environment has been very active. As already highlighted, the transition tariff increases, with the 319% increase in February 2024 and the average monthly increase of 4% since August 2024, have driven a sharp rise in operating results, Within the first quarter of 2025, as I said, EBITDA has rose to 63.2 billion pesos from 6.9 billion pesos in the first quarter of 2024, nearly 10 times compared to the previous year. Resolution 304 of 2025 was notified on April 30th, which contained the outline of the five-year tariff review decisions for 2025 to 2030, which granted in the norm a tariff increase of 14.34%. to limit the inflation effects on the broader economy in Argentina, which is in line with the government's stated policy. The increase will be applied gradually. 3% granted as of May 1, 2025, which will follow by a monthly adjustment of 0.42% starting in June 2025 until November 1, 2027. This will be in addition to the continued monthly adjustments for inflation, which are scheduled to continue with the inflation index. Polynomic formula weighted 33% of the customer price index and 67% on the wholesale price index. The efficiency incentive factor, E-factor, was also approved. In addition, the company's concession agreement was updated, effective May 1st, 2025. This includes new approved tax related to the electricity rate system, the electricity rate setting procedures, quality regulations and penalties, and supplies regulations. The approved VAT was $600. 19 397 million pesos as of december 2023 currency which adjusted to may 2025 currency is 1.2 billion pesos the company is analyzing the details and impact of the increases which as you understand is highly complex for our part we remain optimistic about the outlook of the company Completing the full tariff review is a major milestone that should help further reduce regulatory uncertainty and provide more confidence to our investors. The transitional tariff increase that we have received since February of 2024 have been a key driver to improve earnings and cash flow, which have allowed us to pay 100% of the current monthly invoices from energy purchased from CAMESA since April of 2024 and honor our two financial plans with CAMESA, which are made of a 96% installments payments plan. Over the last few months, there have been some new developments relating to include Camisa pending balances in payment plans. In March and April, the government issued a Decree 186 Dash 2025 and Directive and First 2025 that had several provisions. First, the regularization of the debt not included in payment plans existing prior to November 30th, 2024. The principal amount is 128 billion pesos. The term is 72 monthly installments. The grace period is 12 months. The interest rate is 50% of the main interest rate. And the second regularization program is the conversion to pesos of the current payment in megawatts, Article 89 of the law. The book value is 122 billion pesos, and it is very important because as the government is taking out subsidies with this, we're going to be able to adjust the plans with an interest rate and not with the taking out subsidies from the government that will increase more than the interest payments. Conversion of the outstanding balance of the date of signing of the agreement. Megawatts will prices of the payment as of October 2024 and same conditions as the subscribed plans maintaining the number of remaining installments. There is no grace period and the interest rate is 50% of the MEM with semi-annual review. All these agreements are not yet formalized. We are discussing and conciliating with the CAMESA all the numbers in order to be able to sign these agreements in the coming weeks. The regulatory asset claim is still pending and the company is working hard to discuss that with the Secretary of Energy. Financial results revenues rose 48% in real terms in the first quarter of 2025 to 638 billion pesos versus 430 billion pesos for the prior year. This was mainly due to the impact of the February 2024 tariff adjustment and the subsequent monthly adjustments since August of 2024 that averaged 4%. The tariff adjustments implemented offset the effective of the slightly lower of sales that were only 0.6% year to year. Energy sales evolution. As mentioned in the first quarter, the energy sales volume declined 0.6% year to year to 5946 gigawatts, led by the effect of the economy and demand on the commercial and industrial segments. Adenauer customer base in the first quarter of 2025 reached 3.34 million people, 1% higher versus the first quarter of 2024. This rise was mainly due to an increase in residential and medium-sized commercial clients. The rise was helped by market discipline measures, including the installation of 4,600 and 83 energy meters in the first quarter of 2025, which are designed to convert informal and unreportable connections into fully transparent connections in the electricity distribution system. Distribution margin. The first quarter of 2025, our distribution margin rose to 258.4 billion pesos, mainly due to the increase in the tariff implemented in February of 2024, plus the periodic adjustment since August, partially offset by higher energy costs due to the reduction in subsidies and lower sales volume. At EBITDA, for the first quarter of 2025, EBITDA reflects a significant improvement in real terms to 63.2 billion pesos from 66.8 billion pesos in the same period of last year. The main factors driven the first quarter EBITDA were a positive impact to earnings from the adjustment of February of 2024 and the 4% monthly tariff adjustments implemented since August of 2024, which were partially offset by the increase in energy purchase costs due to a reduction of subsidies, which established a limit of 204 kW per month for N3, our middle-income clients, and 350 kW per month for N2, our low-income clients. Net financial expenses. Net financial expenses are 68.3 billion pesos in the first quarter of 2025, were lower than the same period of the previous year, 80% lower. The main reason of this reduction is the impact of interest being paid to CAMESA and penalties and fines. On the net income line, Edenor posted a profit of 35.9 billion pesos compared to the profit of 113 billion pesos in the first quarter of 2024. The difference is mainly due to a much lower accounting gain related to inflation due to the sharp drop year to year in inflation trends of the country. Not including these adjustments results shows a significant improvement due to improved operating results and lower financial expenses. CAPEX For the first quarter of 2025, we invested 79.4 billion pesos, which was up 4% versus the first quarter of 2024. Our investment spending reflects our firm commitment to improve service, which is reflected in the significant improvements in our operating indicators. We have been able to go through the summer without really big incidents. We continue to work to transform our network into a smart network by installing increasing number of remote control points, tele-supervision points and wealth of smart meters. This allows us to solve problems in our high and medium tension networks remotely and quickly. We do by isolating any part of the system experiencing a problem and reestablishing the services without sending people to the ground. Operating Indications Now let's look at a few of the operating indicators. Our energy losses for the last 12 months were 15.5% as for the first quarter, in line with the 15.2% in the fourth quarter of 2024. Reducing energy losses is a top priority, and our multidisciplinary teams are working constantly to find innovation ways to combat energy losses. These efforts are completed by our market discipline initiatives that are aimed at covering inefficiencies and irregularities. Also, analytical tools powered by artificial intelligence have improved inspection efficiencies and our market discipline actions continue to detect and rectify irregularity connections. It is important to remember that the 15.5% total losses, a full 9.61% are losses recognized by the regulator in our target. Quality of service. As mentioned earlier, our investment plan is continued to contribute improvements in service quality by reducing the duration and frequency of outages, which have been a downward path since 2017. These levels are and have been comfortably extended, the levels required by the regulatory entity. For the first quarter, the SAIDI and SAIFI services quality show a continuous strong performance 7.9 hours and 3.2 average outages per client in the quarter at record levels and down 61% and 65% respectively compared to 2017 levels. This recovery in services is mainly due to the strong level of investments that the company has been made since then. Investments have been focused on implementing improvement in operational processes and adopting the technology applied to the operations and management of the network. Financial debt. On the first quarter of 2025, Edenor's capital structure was further improved by the cancellation of March 7 of 24 billion pesos in the principal and interest class 4 notes and the cancellation of the remaining 9 million dollars in the principal and accrued interest of class 1 notes. The total capital debt outstanding after such payment is now 308 million dollars. Maturity schedules. On slide 22, you can see the maturity schedules of the debt as of March 2025. Our maturities are well spaced over the coming years, with only $18 million schedules for the remaining of 2025, post the recent cancellation of $9 million in principal of the class 1 just mentioned. Closing remarks. To close, I would like to reiterate several key points. First quarter results were strong and reflect the benefits of the sustainable positive adjustments that we have received since 2024 and all the monthly adjustments that we have received since 2025. The five-year tariff review process has been completed. We are an industrial leader in Argentina with leading 20% of market share in the electricity distribution. We are remaining focused on the future transformation growth opportunities as we take advantage of opportunities to benefit from the energy and transition in our distribution business and potential growth opportunities in the other segments of non-regulatory business, such as energy generation, storage and critical minerals. EDENORTECH, a subsidiary, was created to perform such activities. So far, there are no projects that we can share with you, but we are analyzing many of them and we'll come back to you in the future. With this, I now would like to open the call for questions. To ask questions, please send written message to IR in the north 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 shareholder and bondholder.

Thank you very much. Now, so we will start with the Q&A session. The first question from Gustavo Faria from Bank of America. How were the results of the terrorist review versus the company's previous request? Do you plan to change the OPEX plan after the results of the terrorist review versus the $200 million per year? Do we have access to the rub and regulated OPEX assumptions? Let me pass the call to Silvana that will answer the question.

Good morning. Thank you very much for joining. Our assumptions, considering the guidelines that the regulator has requested, on February, 2027, sorry, 2027 or 2035, we have the... Sorry, I apologize.

I just started talking the question.

Okay. Hello, thank you very much. Thank you very much, Gustavo, for your question. I'm going to summarize the process just so everybody has the same information. By the end of January 2025, we have submitted the final report according to the guidelines of the regulator. By the end of February, we have the public hearing. And now on April 30, we are notified of the final resolution of the regulator. However, the information contained the RAB, the OPEX, and all the calculations were not included in the resolution that was public. So the information that Gustavo is requesting is not public. We have requested to have access to the file. The access to the file was at the end of last week. So at this moment, we are analyzing all the information. The idea is that we will probably had to submit a claim because the numbers are different from us. And I can remind you which ones were the numbers that we requested. The VIB, so the requested remuneration for us was 893,000 million pesos as of December, 2023. The RAB, the final, the new replacement value calculated according to the guidelines were 7,310,000 million pesos. And the technical preceded value is 3,304,000,000 pesos. The OPEX was 362,000,000 pesos. It's important to highlight that we are analyzing everything and we will probably call you. We can organize another call where we can discuss all the information once this is analyzed.

So now let's go to the second question, also from Gustavo. How are the discussions with the government really negotiate part of the debt with CAMESA? What is the total amount of the debt on balance? Do you have any off balance debt with Kamesa? Is there any possibility about a reversal of part of the debt?

As we explained in the call, this regularization has not been signed yet, but we are working in order to sign this as soon as we can in the next week. The plan that is in megawatts that will be converted into pesos. The book value as of the 31 of March of 2025 is 122,000 million pesos. This is the book value that will be converted into megawatts as of the price of October 2024. And we will continue with the same amount of installments that we have now. And considering the rest of the debt, the principal is 128,000 million pesos or 128 billion. That is the principal. Then you have to add the interest. That is something we are conciliating with CAMESA. and that will be included in a payment plan of 72 installments with 12 months grace period. The rest of the debt you see in our financial statements is current debt, which corresponds to the monthly invoices of Comesta. There was one part of the question, Gustavo, that I didn't answer, which is related to how much it will be our CAPEX plan, it's important to remember that in the past, we are investing about $221 million of average per month in the last 10 years. A year, yes, a year. And that in our presentation in the public hearing, it was 1 million of million pesos for the next five years as of december 2026 the final answer will be done after we finalize the all the analysis we are doing considering that we have access to the information in the last few days so next question came from daniel guardiola from btg factual

What he says, considering the new tariff framework, can you provide an indication of what is the expected annual EBITDA and free cash flow generation? What are you planning to do with the free cash flow?

At this point, we prefer not to do any assumption of how much it will be our EBITDA. As we said, we are analyzing all the effects of the new tariff review. And of course, you know, we cannot make forward-looking statements.

The second question came from Sean Monroe, which says, do you anticipate being able to recover the commercial liability via specific charge?

We are analyzing what we call the regulatory asset base. We are analyzing that with the government. It's a possibility, of course. It's something that happened in the past. In March 19, we had some compensations of the amount we owed to Hamisa at that time, but there is nothing we can share now.

The second question is from Danielle again, Guardiola. Have you considered to distribute dividends?

Once we have all the plan, the bid and the cash flow, we can start thinking about a policy in order to distribute dividends once everything is in the process to do that. We cannot say what we are going to do next year, because it will be done if we done since 2026, not this year. Holders making... Holders, but it has to be done after this year.

And then... There is a question from Gustavo Faria again. What he says about local news mention about the potential interest of the government stake in TransCenet. Can you share more details about the potential interest? I cannot make any comments on this. Sorry. What about the mining initiatives. Has EDENOR decided to make new business?

As we said previously in some of the previous calls, we have created EDENOR Tech in order to acquire renewable energy or conventional generation, storage, or critical minerals. It's one of the EDENOR Tech new business. We are analyzing different projects. We cannot share more information at this point.

There's another question from Daniel, but I believe Silvana already answered about that related on CAPEX because he said, can you provide details on a year-on-year basis on your CAPEX for the next five years?

As we said, the information Information that is public and that is available is what we requested in the public hearing, which is one million of million pesos as of December 2023. And all the details is in the presentation we made to the regulator at that time.

The following question is from Daniel again. When analyzing new projects, what is the minimum rate EER threshold you require to move forward?

That is something we don't have defined yet. We are analyzing different projects and we cannot share anything at this point. Sorry.

And at this point, we don't have any further questions. So with this, we finalize the call. And please be able to contact the IR team if you have further questions in the future. And of course, we are always open to any questions. So have a very nice day. Thank you. Thank you very much. Goodbye.