Empresa Distribuidora Y Comercializadora Norte S.A. (Edenor) Q2 2025 Earnings Call Transcript

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August 11, 2025

Key Takeaways

  • Positive Sentiment: Tariff normalization significantly improved operating performance: Second-quarter EBITDA rose to ARS 222 billion from ARS 108 billion a year earlier, while first-half EBITDA reached ARS 289 billion. Excluding the ARS 168 billion one-time gain from the CAMMESA debt agreements, first-half EBITDA was approximately ARS 121–122 billion.
  • Positive Sentiment: CAMMESA liabilities were regularized through three payment plans covering all outstanding energy-purchase balances, with maturities of 72 to 75 installments. The agreements reduced financial expenses and generated a substantial accounting gain.
  • Positive Sentiment: Financing access and credit quality improved: Edenor issued $95 million of new notes, including $80 million in dollar-denominated notes at an 8.5% coupon and ARS 20 billion in peso notes. S&P and Moody’s both upgraded the company’s ratings, with Moody’s assigning a positive outlook.
  • Neutral Sentiment: Energy sales increased 1.85% year over year and the customer base grew 2% to 3.36 million, while ARS 163 billion was invested during the first half in network expansion, automation, and smart meters. Service quality continued to improve, with quarterly SAIDI and SAIFI down 72% and 66%, respectively, from 2017 levels.
  • Negative Sentiment: Energy losses remained elevated at 15.55% over the last 12 months versus 15.18% in 2024, despite efforts to address irregular connections. Higher energy-purchase costs resulting from reduced subsidies also partially offset the benefit of tariff increases.
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Earnings Conference Call
Empresa Distribuidora Y Comercializadora Norte S.A. (Edenor) Q2 2025
00:00 / 00:00

There are 2 speakers on the call.

Operator

Good morning. My name is Lucila Ramallo, Investor Relations Deputy Manager at Edenor. On behalf of Edenor, we would like to thank everybody for participating in this conference call to discuss the results of the second quarter that ended June 30, 2025. We will also have an important recent development and advances in our efforts to strengthen our position as an energy leader. If you would like to receive our annual release or presentation, you can download them easily from the investor relations section on our website located at www.edenor.com or contact our investor relation teams to request the document. This event is being recorded. After the company remarks are completed, there will be a question and answer section for which you may submit questions through the webcast chat.

Operator

Before proceeding, let me mention that forward-looking statements are based on the belief and assumptions of Edenor management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to the future events and therefore depends on circumstances may or may not occur in the future. Investors should understand that general economic condition, industry condition, 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 Germán Ranftl, our CFO, who will guide us through the presentation. Thank you.

Speaker 1

Thank you, Lucila. 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 Edenor performance during the second quarter of 2025. Highlights and relevant events. Before moving to the discussions of details of our financial performance during the second quarter of 2025, I would like to take a few minutes to highlight some very relevant and positive developments as shown in slide 5. Accumulated EBITDA for the first 6 months rose to ARS 289 billion, which reflects a sharp improvement in operating results due to the tariff increases, starting with the 319% adjustment that was received in February 2024, followed by 4% average monthly value-added distribution adjustments since August of last year, plus the five-year tariff review implemented since May of 2025.

Speaker 1

Their results also includes a gain of ARS 168 billion due to the positive effect of the regularization of the agreement with CAMMESA for the payment of energy purchases from previous periods. Excluding this gain, the accumulated EBITDA as of June 30, 2025 is ARS 121 billion. During May 2025, all pending balance with CAMMESA for past energy purchases were included in three payment plans of 72 or 75 installments, depending on the plan. Last week, we successfully issued $95 million in new notes with $80 million in Class 8 notes and ARS 20 billion in Class 9 notes. As far as our credit ratings is concerned, in June, Standard & Poor's raises its global scale rating from CCC+ to B- with a stable outlook.

Speaker 1

During July 2025, Standard & Poor's upgraded the company's institutional and global negotiable obligations program rating on the national scale from raBB to raBBB- with a stable outlook. At the same time, Moody's raises its long-term global scale rating from Caa1 to B3, changing its outlook from stable to positive. Regulatory framework. As we already highlighted, the tariff increases that were given in February 2024 and the average monthly increases of 4% since August 2024, followed by the implementation of the five-year tariff review, have driven a sharp rise in the operating results with, in the second quarter of 2025, EBITDA rising ARS 222 billion from ARS 108 billion in the second quarter of 2024. The five-year tariff review granted the company an increase of 14.35% over inflation.

Speaker 1

This is being applied gradually in order to limit the inflation effects on the broader economy in Argentina, which is in line with the government's stabilization policy. 3% went into effect on May 1st, 2025, and further adjustments of 0.42% are being implemented over inflation, as I said before, from June 1st, 2025 until November 1st, 2027. Plus a monthly adjustment for inflation with a formula that is made up of 33% of consumer price index and 67% wholesale price index. Wholesale price index always follows devaluation. Together, these adjustments total 3.24% for June, 0.75% in July, and 2.1% in August. CAMMESA debt.

Speaker 1

As I mentioned earlier, the tariff increases that we have received since February 2024 have been a key driver of improvement in earnings and cash flow, which will allow us to pay 100% of the current monthly invoices for the energy purchase since April 2024, as well as paying all the financing plans that we have outstanding with CAMMESA. On May 21, we signed a plan to regularize debt for energy purchases that have not been included in the existing payment plans over the total of 72 installments with a 12-month of grace period and an interest rate of 50% of the interest rates used by CAMMESA, adjusted semi-annually.

Speaker 1

In addition, a prior existing plan whose installments were adjusted based on the energy price in megawatt-hours was converted into pesos at the energy applicable megawatt-hour price of October 2024, with an interest rate of also 50% of the interest rate used by CAMMESA. With the same condition as the current plan, 75 installments remaining as of May with no grace period. The positive impact of these agreements resulted in a gain included in the second quarter of 2025, resulting of ARS 168,220 million. The regulatory claim for past tariff adjustment differences is still pending and represent approximately three to four times what we owe to CAMMESA. Financial results, revenues. Revenues rose 2% in real terms in the second quarter of 2025 to ARS 622,989 million versus ARS 608,876 million for the same period of last year. This was mainly due to tariff normalization, as explained before. Energy sales evolution.

Speaker 1

As mentioned, the second quarter of 2025, energy sales volume increases 1.85% year-to-year to 5,668 gigawatt hours, led by the effect of lower temperature and demand from residential customers. Edenor's customer base at the second quarter of 2025 reached 3.36 million people, 2% more versus the second quarter of 2024. This raise was mainly due to an increase in residential and medium-sized commercial clients. The raise was helped by market discipline measures, including the installation of 9,951 smart meters in the second quarter of 2025, which are designated to convert informal, unreported connections into fully transparent connections in the electricity distribution system. Distribution margin.

Speaker 1

For the first six months of 2025, our distribution margin rose to ARS 523 billion, mainly due to the increase in the tariff as a result of the tariff normalization process, partially offset by higher energy cost due to the reduction in subsidies and higher sales volume. EBITDA. Looking at the EBITDA for the second quarter of 2025, EBITDA of ARS 222,338 million was recorded and an improvement for the ARS 107,969 million registered in the same period of the previous year. A gain of ARS 168 billion is included due to the positive effect of the regularization agreements with CAMMESA for the outstanding balance. With this effect, the accumulated EBITDA as of June 30th is ARS 121 billion without the effect of CAMMESA debt. Positive impact was due to higher revenues as a result of the increase year-to tariff review included.

Speaker 1

The 319% in August and all the monthly adjustments that have been given since August 2024 of 4% on average. Increases cost of energy purchase due to the reduction in subsidies, which establish limits of 250 kilowatts in customers N3 and 350 kilowatts in customers N2. Net financial expenses. Net financial expenses of ARS 110 billion in the second quarter of 2025 were lower than the same period of the previous year, less 40% versus the second quarter of 2024, primarily due to the reduction impact of interest on debt with CAMMESA and interest and penalties. Net results. On the net income line, Edenor posted a net profit of ARS 93 billion compared to a profit of ARS 68 billion in the second quarter of 2024.

Speaker 1

The difference is mainly due to much lower accounting gains related to inflation due to the sharp drop of year-to-year of inflation and the higher income tax charges, offset by the positive effect of the CAMMESA agreement. Not including the CAMMESA agreement resulted benefits from improvement operating results and lower financial expenses. CapEx. As of June 30th, 2025, we invested ARS 163 billion in line with our 2025 CapEx plan. Our investment spendings reflects our firm commitment to improve service quality, which is reflected in the significant improvement in our main operating indicators. We highly our expansion of Zappalorto substation, the new 132 kV electroduct Zappalorto-Merlo, and the new step-down transformer in Puerto Belgrano. We continue to work to transform our network into a smart network by installing increasing numbers of remote control points, tele-supervision points, as well as smart meters.

Speaker 1

This allows us to solve problems that rise in the network remotely and quickly, which we do by isolating any part of the system, experience a service problem, and reestablishing the service to the rest of the customers. We can do this without sending a team physically to the location within a few minutes. More than 44% of the customers are resolved in less than 3 minutes. Let's look at the key operating indicators. Energy losses. Our energy losses for the last 12 months were 15.55% as of the second quarter. Little change from 15.18% in 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 complemented by our market discipline initiatives that are aimed at curbing inefficiencies and irregularities.

Speaker 1

Analytical tools powered by artificial intelligence have improved inspection efficiencies, and our market discipline actions continue to detect our rectify irregular connections. It is important to remember that the 15.55% total loss, a full of 9.59%, are losses recognized by the regulator in our tariff. Quality of services. As mentioned earlier, our investment plan is continuing to contribute improvements in service quality by reducing the duration and frequency of outages, which have been on the down path since 2017. These levels are, and have been, comfortable exceeding the levels required by the regulatory entity. For the second quarter, the SAIDI and SAIFI service quality indicators shows continuous strong performance at 7.8 hours and 3.1 average outages per client in a quarter, at recorded low levels and down 72% and 66% respectively, compared to 2017 levels.

Speaker 1

This recovery in services is mainly due to the strong level of investment that the company has been doing since then. Investment has been focused on implementing improvements in operational process and the adoption of technologies applied to the operations and management of the network. Financial debt. On August 7, we successfully issued $95 million in Class 8 and 9 notes at attractive rates. Class 8 notes in dollars. Amount $80 million. Received offers of close to $81 million. Interest rate 8.5% with biannual payments. Amortization 12 months, due in August 2026. Argentine law. Class 9, sorry, in pesos. Amount ARS 20 billion, approximately $15 million. Received offers for ARS 25 billion. Interest rate, TAMAR, which is the local interest rate, plus 6, with quarterly installments. Amortization bullet, also 12 months, due in August 7, 2026. Argentine law. Financial debt.

Speaker 1

With the improvement in our risk profile due to important changes on the regulatory front, as we mentioned before, Standard & Poor's raises its global scale rating from CCC+ to B- with a stable outlook. Standard & Poor's also upgraded the company's institutional and global negotiable obligations program rating on the national scale from raBB to raBBB- with a stable outlook. Furthermore, Moody's raises its long-term global scale rating from Caa1 to B3, changing its outlook from stable to positive. As you can see, the maturity schedule of the debt as of June 2025. In August, we canceled notes Class 6 for ARS 18 million, which was make a total of $54 million, sorry, canceled during 2025. Closing remarks. The five-year tariff review was completed according to schedule.

Speaker 1

It improved the long-term outlook of the company and providing more visibility for ratings with accumulated EBITDA of ARS 289 billion in the first months of 2025. Remember that taking out the CAMMESA effect is ARS 122 billion, the EBITDA of 2025 first 6 months. CAMMESA debt regularization, all outstanding balance are now included in the three payment plans to be paid over 72 and 75 installments. The company successfully completed bonds issue of $95 million. As I said, $80 million in dollars and ARS 20 billion in pesos. As part of our energy transition strategy and the expansion of our corporate business, we recently made our first minority investment in the lithium and copper business in two projects in the pre-exploration stage in the Northern Argentina, Polimetales Copper and the Antofalla, Cortaderas, and Ancasti Lithium. With this, now, we would like to open the call to questions.

Speaker 1

To ask a question, please send a written message to IR Edenor through a question and answers menu. Identify 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 for participating in our quarterly conference call. Please do not hesitate in contact our investor relations department for any further inquiries you may have. Good morning to all of you, and have a nice day.

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