Q3 2021 Central Puerto SA Earnings Call

Good morning, and welcome to the Central Puerto Conference call. Following the results announcement for the third quarter ended on September 30th 2021, all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions. Please note that this event is being recorded if you do not have a copy of the press release. Please refer to the Investor support section on the company's corporate website at Www Dot central Puerto Dot Com a replay of today's call may be accessed by accessing the webcast in the investor support section of the central Puerto corporate <unk>.

Site.

Before we proceed please be aware that all financial figures were prepared in accordance with the I F. R. S and are stated in Argentinean pesos unless otherwise noted.

It is worth noting that financial statements for the third quarter ended up September 30th 2021 include the effects of the inflation adjustment Accordingly, the financial figures mentioned during the call, including the data from previous periods and the growth comparisons have been stated in terms of Argentine pesos at the end of the reporting period.

Also please note that certain statements made by the company during the conference call are forward looking statements and we refer you to the forward looking statements section of our earnings release and recent filings with the SEC.

Central Puerto assumes no obligation to update forward looking statements, except as required under applicable securities laws to follow the discussion better. Please download the webcast presentation available on the company's website. Please be aware that some of the numbers mentioned during the call may be rounded to simplify the discussion.

On the call today from Central Puerto is Bernardo bone, It Chief Executive Officer, and Ricky Tonio, Chief Financial Officer, Milagros Grande financial manager and Nicholas Mckee Investor Relations Officer, and now I will turn the call over to Fernando bone. It Mr. Bennett you may begin.

Thank you very much good morning, and welcome we are joining you today with our management team from one site in Argentina to report on the results of the third quarter 2021, and then answer any questions.

I would like to begin the call late and the recent events comment on the progress of a bunch of Brushy lines.

The operating figures of the quarter Milagros, who will present, the latest financial news and Russell.

First of all.

To highlight the new resolution number 1037 of 2021, which was published in the official Gazette on November 2021.

City of energy upon refined in the state of high energy supply requirement.

We do that all in the area create an export accounts, where the income margin for the electricity energy exports operations will be accumulated.

And will be applied in the financing of the energy infrastructure project.

In addition, the resolution establish an additional and transitory when we're a ratio on the spot.

Generating agents included in resolution or kind of the airport.

That will cover economic transactions between September one 2021 and February 28 of 2022.

The amount of these additional remuneration will be defined by the secretary of energy, who are future regulatory instruction not published yet.

I'll go into phase III ignite to talk about seeks another Enzo cogeneration plant than it is currently being Central Park.

Thanks, Sean.

On August 15, 2021, we finally reached the commercial operation of the terminal seemed to buying commencing operation as a combined cycle and it started to sell energy.

The Ppas thing we'd come in.

These highly after the fine tuning of the implied deemed.

Steam supply contracts that start on October 31 of two dosing so anyway.

Due to the strong impact of COVID-19, and the related restrictions, we suffered a delay of 53 days in reaching the commercial operation date say in the PPA.

On August 23.

'twenty, one coming in from that payment.

For for media in U S dollars will apply for the delay of the 53 days.

The company rejected.

And all day or the length of the COVID-19 extraordinary impact too.

Energy and coming through.

So regard such fancy.

With these new power plants finish since 2018, we successfully accomplished the construction of two cogeneration plant of four <unk> and 84 megawatts.

While energy and seven wind farms of 374 megawatts of renewable energy with an investment.

<unk> 900 million U S dollars.

Another important development to highlight is that in certain parts of poverty.

Third sustainability report, where the economic social and environmental management and actions taken.

Taking during 2020 average grade.

Now I would like.

To comment on the latest develop them.

Developments in the industry.

You can see on page four and five in terms of installed capacity. The system reached 42 point 589 megawatts in this thing in the third quarter of 2021, resulting in an.

<unk>, 3% increase compared to the third quarter of <unk>.

Faith in the near term on unit, which raised 2% and there are unusual projects that grew 25% our plant terminal.

Excellent.

One we incur are part of the new capacity, which commenced operation in this period.

As of September 32021, being spoke capacity is Dubai in 15.

59% of thermal and 25% hydro, 4% nuclear and 11% renewable.

In third quarter of 2021 energy generation increased 11%.

37.

You too.

D E G O what's at work compared to the third quarter of 2000, and saying mainly due to.

24% increase in terminal.

At 17% increase in nuclear and a 14 40 sorry.

Per cent increase in renewables, partially offset by a decrease of 33%.

Overall improvement was due to a higher demand and more exports.

Thermal and renewables rice was due to a new capacity installed and construct the drop in the hydro generation is related to the drought.

The region has experienced in the past month and concept and consequently, the reverse lower flows.

During the third quarter of 2021, the main source of energy generation continued to be the turmoil in height with a shadow, 64% and 15, respectively. Meanwhile, renewables keep growing and represent 12% threep.

Points more than the third quarter of two dose into it.

Finally.

On page five energy demand increased 5% up to.

74 point.

446, G or what's at work compared to the third quarter were.

Great demand residential and commercial rice, 16%.

And commercial growth, 4%. This was partially offset by 1% decrease in the residential.

The increase in commercial and great demand segment in the third quarter 2021 is attribute to a recovery of the economy activity and lower restriction imposed by governments compared to the same period of the previous year.

All three months of the quarter show comparative increases.

As of the third quarter of 2021 regarding the demand instructor 47 is represented by residential users.

26% by commercial activity and the remaining 27% is related to the great demand residential and commercial.

Oh and now to our key performance indicators for the quarter as you can see on page six energy generation. During the third quarter 2021 was was 344 <unk> of electricity.

12% lower than the same dosing and twin.

The decrease was mainly caused by.

582, <unk> <unk> drop in the hydro generation from <unk> to allow either due to a lower water inflows in the Lee My ankle shall include a weaver.

This was partially upset by 107 G O what we're right in the energy generation from renewable units.

Bradley as a result of can only buy one.

Full operation and and 13 <unk> that will increase in the thermal production, mainly due because terminal service operation.

The steam production during the third quarter increased 4% due to a good performance of Mccann the crucial cogeneration plant.

Regarding the availability of our thermal units during the third quarter of 2021, it reached 90% inline.

In line with the strong availability history of since our board took wiedemann.

And shows an improvement from the 89% of the third quarter of 2020.

I referenced the market ever rush availability of thermal units for the third quarter of 2021 was 82% according to data from companies.

And now I will turn the call over Milagros will comment on the financial highlights. Thank you Fernando I was saying to some recent financial yields for the company and then comment on the research was no corner those 2021.

On September 32021.

Sip in energy solutions, both of T cell since I met all requirements and conditions dilution the financing documents for the project completion I'm sorry, the corporate guarantee granted by since I put the two each project was released.

Now to our reset until first quarter as you can see on page eight although revenues were 13 3 billion pesos as compared to 13.8 million during the third quarter of 2020. This follow up question decrease was mainly due to a 6% decrease in sales.

The contracts, which totaled six 3 billion pesos in the third quarter 2021 as compared to six 6 million in the third quarter of 'twenty 'twenty. This was due to a higher inflation inflation a gentleman over the peso depreciation for same period.

Despite the higher generation produced late terminal, let's take something of a loved one.

Also an eight person dropped 15 sites, which still see airplanes five.

$5 billion in this whole quite F. 2021 compared to the same period of 'twenty 'twenty also you inflation, they're supposed to appreciation variations on this by the production increase.

Going to page nine we can see changes in the way the da excluding impairment I'm funny FX difference on interest, which was 6.5 billion pesos in the third quarter of 2021 compared to 9.6 billion peso seen the third quarter of 'twenty 'twenty. This decrease was due to a 20.

10% or 1.4 billion pesos increase in the cost of sales.

25% or CMO, Boeing 2 billion pesos right, India administrative.

Selling expenses.

The increase in coastal states was primarily driven by a 45% or 0.6 billion increasing purchase yourself my team in a sense the airports and.

20% or 0.9 billion increase in cost of production, mainly due to an increase in depreciation RAC and see some compensation services.

More materials and spare parts.

We can mention 38% decreasing foreign exchange difference on the breaking assets mainly related to trade receivables due to a lower depreciation of the Argentine peso in the quarter.

Our trade receivable balances.

Oh. So then they got two besides the 1.2 billion pesos for provision charges retails impacted the adjusted EBITDA.

Going to page 10.

Suddenly they didn't net income was $2 7 billion pesos compared to a consolidated net income of 3.5 billion in the same period of 'twenty 'twenty.

In addition to the fact that I mentioned before the net income was affected by lower financial income.

I wanted to see.

3 billion pesos in the third quarter of 2021 compared to 1.4 billion pesos in the third quarter of 'twenty 'twenty, mainly due to 1.2.

Delium basis reduction of net gains on financial assets at fair value.

Net income was also positively impacted by lower financial expenses, which amounted to <unk> 1 billion pesos. During the third quarter of 2021 compared to six 7 billion in the third quarter of 'twenty 'twenty. After we're less foreign exchange difference, which decrease.

He point 9 billion pesos, mainly due to lower depreciation of Argentine peso during the quarter on lower does that mean, they dominated that violence funny collections totaled 3.2 billion pesos in the so quite L. T 21, including B a T associated to their funny trade receivables.

For one thing you got to the power plant.

Bear to 2.1 billion also quite else tiny tiny yeah mounds are being collected on time and according to a signed contract.

Going to page 11, you can see our cash flow for nine months of 2021.

Net cash provided by the Pes activities was 16.8 billion pesos. This included 3.2 billion pesos in collection from weather do you Gotta installment net cash used by investing activities was 4.3 billion pesos, mainly due to the construction.

Of terminal six loss from the sale of their short term financial assets.

Partly offset by the sale of property plant and equipment. Additionally, on the financing side 12.6 billion pesos were used for payment of loan.

487 billion pesos and interests and other loan costs for 3.5 billion pesos.

And now we invite you to ask any questions to our team.

We will now begin with the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw. Your question you May Press Star then two.

At this time, we will pause momentarily to assemble our roster.

Yeah.

Your first question is coming from Martin Aaron set from balanced capital. Your line is live.

Hi, I'm I'll be honest with you have her mother's capital first of all thank you for the marquee us at Chipotle.

Yeah I have two questions if I may 1st of all.

Yeah.

Do you have any proceeds from site going forward given your cash generation.

From now.

On myself more cities.

Yeah.

On this call.

An improvement in commercial payments, what do you see.

In that area going forward.

Yeah.

Okay great. Thank.

Thank you. Thank you for your questions and your interest first of all.

After having finish Thermion seeks.

We are.

Having some additional closing capex from terminal peaks.

Mining Capex, so we expect to finish the project completely during this month.

Apart from that we are analyzing different alternatives one of their needs.

The close of the combined cycle of bringing a low pace.

We are analyzing that we are now using the financing opportunities for that and we are analyzing the evolution of the COVID-19.

Issue in order to have multiyear class.

Alright.

Construction Brushy as you.

As you know.

The Berlin during the construction of terminal seeks regarding they believe not only do they.

In fact it was.

Friction that the government established.

They bring a lot of <unk>.

Boston.

And difficulties in the construction. So we are analyzing all of these and we have.

Perfect on the pipeline as I mentioned, perhaps.

When he is close enough to a combined cycle of really Lopez.

And apart from that we are expecting.

As I mentioned.

We've issue.

Follows how the financial.

Possibilities in the market gain.

And then we'd see a lesion on the brokerage renewables and it also requires increasing the integrate in Argentina. There is no much lower cut capacity on the agreed to install new capacity of renewals. So we are we are analyzing different different options, but we don't have any <unk>.

And he confirmed yet so we expect in the next month after the elections. After the COVID-19 issue is more clear.

We will cut more.

We can clarify tomorrow, how the new versus week out, but that's imaging we have that.

The timeline, there, but we need to wait until we have more clarity on all of those issues. The next question is regarding the <unk>.

The payments that can make the payment we see as you mentioned we see.

A reduction in the delay in filing we are nowadays in 2025 days of delay.

Came from for the 35 40 days of delays in the play.

As well so we are we reduced we see a reduction there we are.

Now they need to increase the budget for floor.

For the base the subsidies that the.

Its ratio descent due to damage that.

So, perhaps we need to wait until when they can increase that budget in order to cut more.

We can clarify if we can maintain those rigs.

The reductions are those days of delayed or.

You see some increased legal news.

Okay.

What we are seeing is big East Grand Mesa are exporting energy to Brazil. So they have an inflow of money there because of that they establish these obviously COVID-19.

And as you establish a new regulation that all debt.

How they can use that money.

But we need to wait until as I mentioned in <unk>.

And that ratio increase.

You got chip for this obviously sets into commission in order to.

Come on.

Call it delays, but we had a golf game.

Maintaining these delays.

Between 25, and 30 days of delay or seeing them.

Yeah.

Okay. One follow up question if I may.

Those are in your.

That's D oracle's hearing them.

On the Montana.

Yes, yes, yes.

They don't know.

Once because there are some limitations.

In terms of I'll say that as I mentioned the capacity we'd capacity so I see some.

Expansion of especially that we already have small expansions to serve.

Right with conflicts.

Okay. Thank you very much.

Okay.

Yeah.

Thank you again, if you have a question. Please press Star then one.

Okay.

This concludes our question and answer session I would like to turn the conference back over to Mr. <unk> for any closing remarks.

Thank you to everyone for your interest in central Puerto and we encourage you to call us for any information that you may need to have a great day. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.