Q2 2023 Central Puerto SA Earnings Call
Speaker 1: Good morning, ladies and gentlemen. Welcome to Central Puerto's second quarter 2023 earnings webcast.
Speaker 1: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker 1: After today's presentation, there will be an opportunity to ask questions.
Speaker 1: Please note, this event is being recorded.
Speaker 1: If you do not have a copy of the press release, please refer to the investor relations support section on the company's corporate website at www.centralfuerto.com.
Speaker 1: In addition, a replay of today's call may be accessed by accessing the webcast link at the same section of the Central Puerto's website.
Speaker 1: Before we proceed, please be aware that all financial figures were prepared in accordance with IFRS and are stated in Argentine pesos, unless otherwise noted.
Speaker 1: It is worth noting that the financial statements for the second quarter ended on June 30, 2023 include the effects of the inflation adjustment.
Speaker 1: 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.
Speaker 1: Also, please take into consideration that certain statements may by the company during this conference call and answer to your questions may include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to be materially different from the expectation
Speaker 1: Constemplated by industry remarks. Thus, we refer you to the Forward-looking Statement Section of our Earnings Release and Recent Filing with the SEC.
Speaker 1: Central Puerto assumes no obligation to update forward-looking statements except as required under applicable securities laws.
Speaker 1: 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.
Speaker 1: On the call today from Central Puerto is Fernando Bonnet, Chief Executive Officer.
Speaker 1: Enrique Terroneo, Chief Financial Officer, and Pablo Calderón, Corporate Finance and Investor Relations Manager.
Speaker 1: And now I will turn the call over to Pablo Calderon. Please Pablo, you may begin.
Speaker 2: Thank you very much. I would like to know into you all. We are joining you today with our management team from Buenos Aires, Argentina to command on our results as the second quarter of 2023. Taking the moment of your attention to review today's agenda, I would like to begin the presentation by addressing the latest development of the company during the period.
Speaker 2: Then move on to analyze the evolution of the Argentine energy sector in the quarter and finally, delve into central portals operating on financial results. At the close to my presentation, we will be happy to address any question that you may have.
Speaker 2: To begin with, an in line with our strategy to increase our environmental performance and contribute to the global discouragement goals on May 3rd, 2023, to honor one of our subsidiaries acquire 100% of the capital stock and boats of the forestry companies and preservation centers of Argentina, last mission is An Explosion of Selena, Sociedad de Sanónima.
Speaker 2: which contribute a total of 80,000 hectares geographically located in the center of the province of Corrientes, of which approximately 36,000 hectares are productive and 36,000 are already counts with fine plantations.
Speaker 2: Following the recent acquisition of Sandra Costanera and in order to comply with the provision of the Capital Market Law and the CNB rules on March 17, 2023, Proner promoted and made a tender offer to all the holders of all the insurance of Sandra Costanera. The tender offer was opened from May 30 until June 12, 2023.
Speaker 2: And the notice of result was published on the following day June 13th, 2020. Maybe the job which it was informed that over 65,000 shares of the company participated in the tender offer. Consequently, learners shareholder in the company represents now 75.69% of the company's capital stock.
Speaker 2: The Shirt of those holders of St. Augustinera that did not participate in the Thunder Ruffer continued to be a stunning and trading in the Buenos Aires of Turkish Change.
Speaker 2: With this acquisition, central porto reinforces its growing Argentina, consolidating its position as as market leader in the power generation sector.
Speaker 2: Now, let's use the next two slides to analyze the evolution of the Argentine Energy Market during this quarter.
Speaker 2: As we can see in this lifefile, the country's install generation capacity increased by 1% or 524 mW.
Speaker 2: in a total of 43, 405 megawatts compared to 42, 891 megawatts in the second quarter of 2022. This increasing capacity was mainly due to the incorporation of 349 new megawatts from the newer sources.
Speaker 2: increasing 7% vis-a-vis the same video of 2022, of which 237 megawatts correspond to solar photovoltaic Santos V dig Brocer, magnifique brochures, and 85 nuevo genetic
Speaker 2: 12 to the new oven hydroprosage.
Speaker 2: 3 MW to biomass and finally 1 MW of biogasped generation units. In turn, thermal capacity sources recorded a net 1% increase or 175 MW as a combination of the incorporation to the system of...
Speaker 2: 780 mW of new combined cycles and the commissioning of 567 mW and 38 mW of gas, turbines and diesel engines respectively.
Speaker 2: Now move into the nullities of the power generation and the amount of the period.
Speaker 2: In the second quarter of the year, energy generation in the local market decreased by 7% to 32,000 and 46 giga-gwasper-hour compared to the same quarter of 2022.
Speaker 2: With a 12% and 8% reduction in thermal and high-duration respectively, partial observed by an increase in energy supply fluid-neutral sources of 3% out of the renewables of 1%.
Speaker 2: In addition, a 13% increase in imports from neighboring countries, mainly from Brazil, contributed to the lower overall local power generation of the pirates.
Speaker 2: This lower power generation in second quarter 33, vis-a-vis the same period of 2002, was the lead consequence of a 6% contraction in energy demand. We was essentially driven by a 10% decline in residential demand as a result of mid-ler temperatures recorded during the quarter, compared to the same period of the year.
Speaker 2: As an example of this phenomenon, the average temperature in May 193 was 16.4 centigrade while in the same months of the previous year it was 13.8 centigrade.
Speaker 2: Well, the historical labors for the same month stand at approximately 14.5 cm.
Speaker 2: The decrease in demand prompted a lower-sermon dispatch, which was also negatively impacted by the lower availability rates of certain power stations, resisted in an average availability of 74% in the second quarter of 2023, vis-a-vis 77% in the same period of last year.
Speaker 2: The lower firm of this patch was compensated with more nuclear and renewable generation as commanded before. The increasing nuclear generation was mainly due to the greater energy production from the nuclear plant at Tucha 1 and to a lesser extent foreign policy. Well, the Tucha
Speaker 2: 2, nuclear plan is still under maintenance and is expected to be back in operations in inculence. Regarding Croniva-Velenergies, the increase in generation was related to the increase in initial capacity.
Speaker 2: Finally, the lower hydro generation was primarily a result of a lower water flow in the Udoa and Paranarrivert, which was mainly driven by the lack of rainfalls and the consequent flow that hit the center and north of the country during the first half of 2023.
Speaker 2: Going now, to keep performance indicators for the quarter on a slide 7, during the 7 quarter of 2023, central port to sub-rated power generation increased by 11% to 4762 shira watt per hour, compared to the 4,000...
Speaker 2: 280 Cigar Watts per hour in the second quarter of 2002. He should be noted that this increase includes the corporation of 953 Cigar Watts generated by Centra Costa de la.
Speaker 2: which was acquired during the previous quarter.
Speaker 2: Thus, when excluding the power generation from Central Costanera, power generation in the second quarter of 233 decreased by 11%, representing a drop of 4 central points beyond the 7% contraction of the market as previously explained. This was mainly due to a 14% lower thermal generation.
Speaker 2: as a consequence of the lower availability of the 16 turbines at the center port of the site and lower the storage of its combined cycle.
Speaker 2: In turn, during the quarter, wind generation recorded a 2% increase in a year-over-year comparison due to a higher capacity factor of our wind farms on the tag of higher wind rates, while higher generation of pideola e-lagila includes by 1%, driven by a higher water flow of the Limae and Cochancura rivers.
Speaker 2: Regarding thermal availability, for better understanding, let's create it down by technology.
Speaker 2: The availability of our steam and gas turbines was 57% in the quarter, compared to 73% in the same period of 2022.
Speaker 2: Combine cycle availability, reach 84% in the quarter compared to 95% in the same period as the previous year.
Speaker 2: It's worth noting that the 2023 figures are impacted mainly by a lower availability of some steam turbines, especially those of Centragostanera, and the shutdown of the Buenos Aires combined cycle at the same power station.
Speaker 2: Thus, when excluding centric austenera from a quarter to a quarter comparison, the availability of central portals, steam and gas servants, good-to-reach 73% and the metric for combined angle, would be 96%.
Speaker 2: It is worth to mention that the one of the sides of the combo is expected to enter in maintenance by the end of this month and to be packing service by the end of the next quarter.
Speaker 2: Finally, steam production in the quarter decreased by 4%, amounting to 560 million tons, compared to the 586 million tons in the second quarter of 2022. This was mainly due to the lower demand from YPS behind the crucial refinery.
Speaker 2: Before going into a more accepted analysis of the evolution of our main financial metrics, let me briefly review the consolidated results of the Central Porto Group during the second quarter of 2023. Our consolidated revenues in the quarter amounted to 38.7 billion pesos, decreasing 6% compared to the same period of the previous year.
Speaker 2: adjusted the beta which excludes foreign exchange differences and interest related to foreign trade receivables and the variation in the value of biological assets from our forestry segment total 17.1 billion pesos being 34.5 billion pesos.
Speaker 2: lower to the chassis of the beta of the second quarter of 2022. Net income for the period was 5.3 billion pesos recording a decrease of 14% vis-a-vis the 5.1 billion pesos of the second quarter of 2022. At the same time, during the quarter we continue deleveraging the company despite the recent acquisitions. As a result,
Speaker 2: the group's total consolidated debt was reduced by 22% to 87.2 billion pesos while the net deposition as of June 30 declined to 24.3 billion pesos.
Speaker 2: Now, assuming our revenues analysis, as you can see on slide 9, this amounted to 38.7 billion pesos in the quarter as compared to 41.3 billion pesos in the third period of 2002. First, it should be noted that in this quarter revenues of the Centrale Porto group include those corresponding to the recent acquisition of Centrale Castaneda.
Speaker 2: and the forestry companies, which contributed with 4.9 and 1.8 billion pesos respectively. Thus, when excluding these effects, the variation in revenues would be a 23% decrease or 9.3 billion pesos, mainly due to the following factors.
Speaker 2: A 35% or 8.3 billion pesos reduction in sales on the contract, mainly as a result of the end of the Brigadier Lopez Gas Service BPA contract in August 2022, and to a lesser extent to the negative impact of a higher inflation rate compared to the peso depreciation.
Speaker 2: A 23% or 0.5 billion pesos contraction in steam sales as production level decreased in line with the lower demand from YPS behind the cushion refinery and a 3% or 0.4 billion pesos decrease in spot legacy energy sales which amounted to
Speaker 2: 13.3 billion pesos in the second quarter of 2023 compared to the 13.7 billion pesos in the same period of the year.
Speaker 2: This was mainly driven by a 65% increase in remuneration by means of the resolution 826 that was below the inflation rate of the period.
Speaker 2: All of this being partially set by the implementation of the resolution 59 on March of the year, which partially dollarized, combined cycle of the moderation and to a lesser extent, the recognition of fuel costs from Kamehzal.
Speaker 2: Moving now to slide 10, for a better understanding of the evolution of our adjusted EBITDA during the second quarter of 2023, the groups adjusted EBITDA reached 17.1 billion pesos, including the adjusted EBITDA of the recently acquired companies Centra Castanera and the forestry companies.
Speaker 2: for 1.3 and 1.2 billion pesos respectively. Thus, on a consolidated basis, the sensitive bid of the quarter recorded the construction of 34 points and compared to the 25.8 billion pesos in the second quarter of 2022 as explained before.
Speaker 2: When analyzing the Chassis de Vida excluding acquisitions, we can observe that the variation is mainly explained by the previously mentioned drop in revenues, a 21% or 3 billion pesos increase in cost of sales explained primarily by higher consumption of materials and spare parts.
Speaker 2: due to the maintenance performed on the gas turbines at the Luja and the Cuso plant.
Speaker 2: an 8% increase or 0.2 billion pesos in SG&A, mainly driven by higher third-party services and personal costs.
Speaker 2: All of this partially offset by an 85% increase or 0.3 billion pesos in other comparative results may lead you to higher interest growth or residuals from Tamesa.
Speaker 2: Moving to the next slide, consolidating NetInkCon for the quarter amounted to 4.3 billion pesos, decreasing 14% on a year-over-year basis. In addition to the lower adjusted ABA of the period, NetInkCon was impacted by a combination of higher loss on net monetary position of 4.1 billion pesos.
Speaker 2: partially offset by better results on our associated companies of the EcoGas Group for 0.2 billion pesos.
Speaker 2: an increase of 2.1 billion pesos in income tax, which is basically the result of higher deferred income tax and adjustment to the provision of the previous period with respect to the amount actually paid in the current period. As I said, by a lower carbon income tax for this period.
Speaker 2: All of this was partially set by a lower loss in net financial results, accounting for a positive variation of 6.2 billion pesos, driven by a gain in the fair value of financial assets, partially offset by higher net interest and negative foreign exchange differences.
Speaker 2: higher positive foreign exchange differences and interest related to the foreign receivables for 3.9 billion pesos and finally higher positive results from an increase in the variation of the fair value of our biological asset for our forest recycling.
Speaker 2: Finally, going to slide 12, we can see the evolution of our cash flow during the first half of the year.
Speaker 2: Operating cash flow totaled 26.4 billion pesos as a result of the adjusted EBITDA of the period, coupled with 5.9 billion pesos in collection of interest from clients, including phony receivables and 3.8 billion pesos in positive working capital variations.
Speaker 2: being all partial upset by income tax payments of 8.8 billion pesos.
Speaker 2: Net cash used in investing activities was 12.2 billion pesos, mainly due to a 16.2 billion pesos deployed in the acquisition of companies made during the first half of the year, coupled with 2.4 billion pesos in investments in property, plant and equipment, and 0.7 billion pesos in inventory partitions.
Speaker 2: being all partially offset by 6.6 billion pesos from the selling of short-term financial assets and a collection of 0.6 billion pesos in dividends during the period.
Speaker 2: Finally, net cash used in financing activities was negative in 21.5 billion pesos.
Speaker 2: It was basically as the result of a
Speaker 2: 12.1 billion pesos in debt service and amortization primarily related to the Brigadier Lopez syndicated loan along with 5.9 billion pesos in interest and other financing costs related to our bank long-term loans
Speaker 2: and the cancellation of overdrafts in checking accounts for 2.4 billion pesos and finally 1.1 billion pesos in dividends paid.
Speaker 2: As a consequence, our cash position as of June 30, 2023 amounted to 4.5 billion pesos, which if current investment in financial assets are included, our total current liquidity amounts to 24.3 billion pesos.
Speaker 2: With this, I would like to conclude my presentation and now I invite you to ask any question to our team. Thank you for your attention.
Speaker 1: We will now begin the question and answer session.
Speaker 1: To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker 1: To withdraw your question, please press star then 2.
Speaker 1: At this time, we will pause momentarily to assemble our roster.
Speaker 1: And the first question comes from Martin from Balance Capital. Martin, your line is live. Please go ahead.
Speaker 3: Well, first, thank you for the materials as always and for checking my questions.
Speaker 3: I have five questions. Sorry for the extent. I will try to be quick. I would like to run them one by one if that's okay.
Speaker 3: My first question is regarding the Pila de la Vida concession. The government gave an extension of the concession of a little asset so it could be the next government, the one that determines the future of those assets. Can you explain to us why you are delusional about the term with Fokkernir
Speaker 3: It is a taken decision to move those plans to government control or could we still see a new auction or an extension of the current concessions? And what is your estimate of evid
Speaker 4: Okay, hi Martin, thank you for your interest and your questions. Regarding Piedra Lailas, as you say, this government, the former government, established an extension of the Constitution.
Speaker 4: In our case that extension has two phases, 60 days first and another 60 days coming after and that will give our end of concession or put our end of concession in February or April next year. So as you mentioned...
Speaker 4: the government that will analyze the extension or another extension will be a new government.
Speaker 4: And for the...
Speaker 4: for what we have been talking with different... Of course, we need to know...
Speaker 4: Who will be the new government? Since yesterday it seems not so clear who will be the new government.
Speaker 4: But we have been talking with different reference from the candidates.
Speaker 4: The perception that we have is that they need to analyze in detail. They don't have an answer yet about what...
Speaker 4: to do with this concession but they need to analyze that and indeed not take a decision like the...
Speaker 4: transfer to an ARSA or to move in a staticization process without analysis and taking in the consideration of the
Speaker 4: claims that the concession, the actual concession has and the relation with the province and the other thing is the investment that this concession needs to have to extend another 30 years of operation.
Speaker 4: In any case that we have been talking with the different reference of the opposition, we talk about taking this...
Speaker 4: extension of one year that the concession has as a possibility not only two months or three months, the one that this government took, but taking this year of extension to analyze indeed. Defense
Speaker 4: all the aspects so we are confident that we can have that extension and then start talking how to proceed with this concession in the near future. So we are optimistic that we have
Speaker 4: we will have the opportunity to discuss that indeed with the next government. That's a good point. Yeah, I'm just wondering. So Ji traps the
Speaker 4: And the video that you mentioned, you asked.
Speaker 4: It's around, that's depending because it's in peso so with the new valuation we need to recheck but it's around 30 million dollars per year.
Speaker 3: Uh, thank you. My second question then...
Speaker 3: Again, we saw this quarter already increased, quarter over quarter, probably partially due to that decision of Sintreco Staneira.
Speaker 3: But results were affected by an increase in optics that more time compensated the additional revenue.
Speaker 3: Could you give us some follow on the mission of OPEX, if it was related to Costa Nera, and what are your expectations of getting to more normal life levels?
Speaker 4: Yes, it's affected by not only the big maintenance that we are doing in our combined cycles, especially in our combined cycles of, it's a co-generation in fact.
Speaker 4: We are performing a big maintenance also in September in the Costa Nera combined cycle and we are having an extraordinary maintenance in the small combined cycle of Costa Nera I am going to walk over these days.
Speaker 4: Buenos Aires combined cycle, Siemens combined cycle is a small one, that suffered a failure, extraordinary failure in March.
Speaker 4: So, we are having a big maintenance of our units, Costa Neda and Lujandecuco plants.
Speaker 4: That is the reason of the increase that you see in the...
Speaker 4: in the op-x.
Speaker 3: Okay, so in the maintenance of September we could see increased topics also next quarter and probably going back to normalised levels by the end. Yes, you will see some increase but we are being paid in this...
Speaker 4: big maintenance since, or we and Enel previously, since September or October last year so we are paying in advance so you will see an increase on capex but not the cash flow.
Speaker 4: because we have been paying most of the capex in advance.
Speaker 3: Okay, perfect. Thanks. My third question, then, the government just devalued the official effects by more than 20%, as you just mentioned.
Speaker 3: With respect to Kamesha payments, there is to be the main tool that government could use to cushion the growth on the increased subsidy bill.
Speaker 4: I don't know really, I don't know. In fact, CAMESA was reducing the delays that we suffer in May and June . For example, we had...
Speaker 4: delayed there of 60 days. Right now we are in 30 days, around 30 days of delay in payments from CAMERSA and also the government as you say the devaluation impacts of course because the cost of fuel and some
Speaker 4: contracts that are set in dollars but in the other hand the government increase the tariff or apply the full increase and the segmentation itself.
Speaker 4: in Tariq that implies an impact of an increase on higher segments of the population. So I don't know really if we can suffer. The good news is that we are ending the winter period in which the...
Speaker 4: of money for for Kamesa and we are ending that call periods and the reduction of the of the build the Kamesa builds are important so I don't know I don't know we are not expecting for sure increase
Speaker 4: In the last more than 60 days that was the higher that we see on May and June .
Speaker 4: But we don't know if we can go something like 40 or 45 days, but not more than that.
Speaker 3: Where do you see a reliability after these big maintenance works in 2024? Well, the 71% is an average so you have there a different combination of equipment and places. If you see only the combined cycles of Central Puerto's building Costa Nera, you reach 95% or 96% which is our normal availability. When you combine with the Costa Nera combined cycles, you reach 95% or 96% which is our normal availability.
Speaker 4: one that I mentioned the central Buenos Aires combined cycle was affected so the percentage will reduce to 84% so whenever we can solve the problem of Buenos Aires
Speaker 4: I think that the, and Buenos Aires is an old combined cycle so we are suffering some problems of the end of the life of this combined cycle.
But on the other hand, the Mitsubishi combined cycle is very reliable so if you exclude the central monocytous combined cycle, the availability of the combined cycles and relatively new units are very good. With Buenos Aires, we are working to get...
On the other hand, the steam turbines, especially the Costanera ones, have a very low availability this water related to young periods of maintenance, related to some problems with the boilers, that we are hoping that we can reduce the timing of these interventions, of these maintenance in the boilers, to replace the tubes that get broken.
and we expect to see better timings or better performance on that maintenance and reduce the unavailability for the next quarters. Of course they are all units as you know and the same as the steam to rise of Puerto so
The availability is not so high like combined cycles, but we expect to reach similar levels or close to similar levels to steam turbines of central Puerto which are around 70-75% of availability in terms of steam turbines.
So we are confident that we can increase that availability in exporters.
Okay, so probably closer to the standard portal, all normalized levels of around
How much of the 8th per year do you expect for that line of business, all the 4s together, the one that you already got and this new one?
Well, as I mentioned last quarter, this is a
forests and lands are almost...
cutting the same that they are planting so the BTDA right now is close to zero, it's around two or three million dollars per year because we are increasing our hectares planted so we are investing on new hectares planted.
But right now, as I mentioned, it's $2 or $3 million. We expect when we finish this process of planting new hectares.
at a BTDA around $10 million, around $10 million and $15 million, between $10 million and $15 million.
Thank you. That's all on my side.
Yes. Thank you. Again, if you have a question, please press star then one on your touchstone phone at this time.
Thank you. Again, if you have a question, please press star then one on your touchstone at this time.
And there are no further questions in queue at this time. This does conclude our question and answer session. I would now like to turn the conference back over to Mr. Fernando Funette for any closing remarks.
Okay, thank you for your interest on Central Porto. Have a good day.
This is Central Porto. Have a good day. Bye bye.
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.