EDN

EDENOR Form 6-K Summary: Condensed Interim Financial Statements

Business Context and Reporting Period

Company: Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR)
Reporting Period: Six and three months ended June 30, 2025
Business: Distribution and sale of electricity in the Greater Buenos Aires area and Province of Buenos Aires.
Currency: Argentine Pesos (ARS), restated for inflation (constant pesos) per IAS 29. Inflation rate for the period was 15.1%.
Regulatory Environment: The period was marked by significant regulatory changes, including the lifting of foreign exchange controls ("cepo"), the implementation of a floating exchange rate band, and a new 2025-2030 Electricity Rate Review (RT) approved by the National Regulatory Authority (ENRE).

Key Financial Metrics

Balance Sheet and Liquidity (As of June 30, 2025)

• Total Assets: 4,664,348 million ARS (vs. 4,580,370 million at Dec 31, 2024).
• Total Liabilities: 2,798,757 million ARS.
• Total Equity: 1,865,591 million ARS.
• Cash and Cash Equivalents: 59,237 million ARS (vs. 27,530 million at Dec 31, 2024).
• Working Capital: Negative. Current Assets (1,090,274) are less than Current Liabilities (1,097,513).
• Borrowings: Total borrowings stood at 545,759 million ARS (426,032 million in USD and 119,727 million in ARS).

Material Changes and Drivers

• Revenue Growth: Revenue increased 22% year-over-year (YoY) for the six-month period, driven by electricity rate increases approved by the ENRE (average CPD increases of 3.5% monthly) and the new 2025-2030 rate review framework.
• Operating Result: Operating profit improved to 34,181 million ARS from 25,030 million ARS YoY, despite higher energy purchase costs. However, the three-month operating result declined significantly to 9,708 million ARS from 61,736 million ARS in the prior year quarter.
• Financial Costs: Net financial costs decreased significantly to 182,851 million ARS from 538,573 million ARS YoY. This reduction is largely due to a decrease in "Other financial results" (fair value changes and exchange differences) and lower monetary losses compared to the hyperinflationary environment of the prior period.
• Monetary Gain (RECPAM): The monetary gain on net monetary position dropped to 144,440 million ARS from 544,015 million ARS YoY, reflecting the stabilization of inflation and exchange rate volatility following the new economic program.
• Debt Regularization: A significant one-time item of 168,220 million ARS was recorded under "Agreement on the Regularization of Obligations," representing the recognition of debt to CAMMESA for energy purchases from Nov 2023 to March 2024, now structured into a 72-month payment plan.

Outlook, Risks, and Unusual Items

• Regulatory Deregulation: On July 4, 2025, the government approved reforms to electricity laws (Nos. 15,336 and 24,065) aimed at deregulating the sector, opening international trade, and allowing private purchase-and-sale agreements. A new National Gas and Electricity Regulatory Authority (ENRGE) is being established.
• Foreign Exchange: The "cepo" (currency controls) was lifted in April 2025, transitioning to a floating exchange rate system within bands. This allows for dividend payments to non-residents and easier access to foreign currency for imports and debt service.
• Credit Ratings: S&P upgraded EDENOR's global scale rating from CCC+ to B- (stable) in June 2025, and Moody's raised its rating from Caa1 to B3 (positive) in July 2025.
• Investment in Mining: The company acquired minority interests in two mining companies (lithium and copper exploration) for 28,999 million ARS, classified as financial assets at fair value (Level 3).
• Dividend Restrictions: Dividend distribution is subject to negative covenants in the Corporate Notes program if the Debt Ratio exceeds 3.75. As of June 30, 2025, the company met the required parameters.
• Contingencies: Ongoing legal proceedings with the ENRE regarding service quality penalties and a class action lawsuit (Procurar) remain pending, though negotiations are underway for regularization.

Investor Verification Checklist

• Debt Covenants: Verify the current Debt Ratio and Interest Expense Coverage ratio to ensure compliance with Corporate Notes covenants (Debt Ratio < 3.75; Coverage > 2.0).
• CAMMESA Payment Plan: Confirm the terms and cash flow impact of the 72-month payment plan for the 168,220 million ARS debt regularization.
• Exchange Rate Exposure: Assess the impact of the new floating exchange rate regime on the valuation of USD-denominated debt (approx. 426 billion ARS) and future revenue collection.
• Regulatory Transition: Monitor the implementation timeline of the new ENRGE and the specific impacts of the deregulation laws on tariff setting and market competition.
• Working Capital: Analyze the negative working capital position and the company's liquidity strategy given the high level of current liabilities (1,097,513 million ARS).
• Restatement Impact: Review the retroactive restatement of prior period financials related to deferred tax liabilities on Property, Plant, and Equipment to ensure accurate trend analysis.