Business Context and Reporting Period
Company: Central Puerto S.A. (NYSE: CEPU), a major private sector power generator in Argentina.
Reporting Period: Second Quarter (2Q23) and Six-Months (1H23) ended June 30, 2023.
Filing Date: August 11, 2023.
Accounting Basis: Financial statements are adjusted for inflation under IAS 29, expressed in the measuring unit current at the end of the reporting period. Consequently, figures are not directly comparable to previously published statements without adjustment.
Key Financial Metrics
| Metric (Million ARS) | 2Q23 | 2Q22 | 1H23 | 1H22 |
|---|---|---|---|---|
| Revenues | 38,693 | 41,281 | 73,282 | 84,671 |
| Gross Profit | 9,407 | 18,665 | 22,980 | 42,857 |
| Operating Income | 26,246 | 27,151 | 55,819 | 59,856 |
| EBITDA | 34,613 | 35,701 | 71,558 | 75,533 |
| Adjusted EBITDA | 17,125 | 25,822 | 37,777 | 58,347 |
| Net Income | 4,349 | 5,087 | 4,509 | 17,191 |
| Cash & Equivalents (End of Period) | 4,494 (1H23) | |||
| Consolidated Net Debt | (24,325) as of June 30, 2023 |
Note: Adjusted EBITDA excludes foreign exchange differences on FONI receivables and fair value variations of biological assets.
Material Changes vs. Prior Period
- Revenue Decline: 2Q23 revenues decreased 6% year-over-year (YoY). Excluding the impact of recent acquisitions (Central Costanera and Forestry companies), organic revenue fell 23% due to the expiration of the Brigadier Lopez GT PPA contract and inflation rates outpacing peso depreciation.
- Profitability Pressure: Gross profit dropped 50% YoY in 2Q23. Operating costs (excluding D&A) rose 47% YoY, driven by higher material consumption for maintenance and increased SG&A expenses.
- Adjusted EBITDA Contraction: Adjusted EBITDA fell 34% YoY to Ps. 17.1 billion. This decline reflects lower thermal generation availability and reduced steam sales, partially offset by contributions from new acquisitions.
- Net Income: Net income decreased 14% YoY to Ps. 4.3 billion, impacted by a 40% increase in the loss on net monetary position due to high inflation.
- Operating Metrics: Total energy generation increased 11% YoY to 4,762 GWh, primarily due to the inclusion of Central Costanera. Excluding this acquisition, generation would have dropped 11%. Thermal unit availability fell to 71% (from 84% in 2Q22) due to technical issues and scheduled maintenance.
Guidance, Outlook, and Risks
- Strategic Acquisitions: Proener S.A.U. acquired 100% of the EVASA forestry group (88,000 hectares) to pursue carbon credits and biomass energy. A tender offer for Central Costanera increased Proener's stake to 75.69%.
- Operational Outlook: The Buenos Aires Combined Cycle (Central Costanera) is expected to return to service by the end of the next quarter. Atucha II Nuclear plant remains under maintenance with a return expected in coming months.
- Market Risks:
- Macroeconomic Volatility: Argentina experienced 24% inflation and 23% currency depreciation in 2Q23, significantly impacting monetary positions and financial results.
- Regulatory & Pricing: Revenue from spot/legacy energy was impacted by remuneration increases (Res. 826/22) that lagged behind inflation.
- Weather Dependence: Hydro generation was constrained by drought conditions in the Uruguay and Parana river basins.
- Unusual Items: "Other operating results" increased 83% YoY, driven by interest on CAMMESA receivables, foreign exchange gains on FONI receivables, and fair value increases in biological assets.
Investor Verification Checklist
- Inflation Adjustments: Verify the impact of IAS 29 inflation adjustments on the comparability of historical financial data.
- Adjusted EBITDA Reconciliation: Review the specific exclusions (FONI FX differences, biological asset fair value) to understand core operational performance.
- Debt Service: Confirm the sustainability of debt obligations given the Ps. 24.3 billion net debt position and high interest rate environment.
- Asset Availability: Monitor the timeline for the return of the Buenos Aires Combined Cycle and Atucha II Nuclear plant to full operation.
- Acquisition Integration: Assess the financial contribution and integration progress of Central Costanera and the EVASA forestry assets.