Business Context and Reporting Period
Company: Central Puerto S.A. (NYSE: CEPU), a major private sector power generator in Argentina.
Reporting Period: Third Quarter (3Q) and nine-month period (9M) ended September 30, 2021.
Filing Date: November 9, 2021.
Accounting Standard: Financial statements are adjusted for inflation under IAS 29. Figures are stated in the measuring unit current at the end of the reporting period (Argentine Pesos).
Key Financial Metrics
| Metric (Million Ps.) | 3Q 2021 | 3Q 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenues | 13,297 | 13,843 | 39,013 | 39,481 |
| Operating Income | 5,651 | 9,886 | 17,646 | 31,285 |
| Adjusted EBITDA | 7,980 | 11,712 | 24,803 | 37,123 |
| Net Income (Loss) | 2,689 | 3,487 | (1,359) | 8,735 |
| EPS (Ps.) | 1.77 | 2.30 | (0.94) | 5.77 |
| Net Debt Position (Consolidated) | (29,744) as of Sept 30, 2021 | |||
| Cash & Equivalents | 276 as of Sept 30, 2021 |
Material Changes vs. Prior Period
- Revenue Decline: 3Q2021 revenues decreased 4% year-over-year (YoY) due to inflation adjustments lagging peso depreciation and lower steam sales. 9M2021 revenues were flat (-1%).
- Profitability Pressure: Operating income dropped 43% in 3Q2021 and 44% in 9M2021. This was driven by a 26% increase in cost of sales (materials, production costs) and higher administrative expenses.
- Net Loss in 9M: The company reported a consolidated net loss of Ps. 1.36 billion for 9M2021, compared to a profit of Ps. 8.73 billion in 9M2020. This reversal was primarily due to a Ps. 4.26 billion impairment charge on property, plant, and equipment (Brigadier Lopez and Lujan de Cuyo plants) and reduced foreign exchange gains.
- Generation Mix: Total energy generation increased 11% in 3Q2021. Thermal generation rose 24% and renewables 40%, offset by a 33% drop in hydro generation due to drought conditions.
- Debt Reduction: Financial expenses decreased significantly (69% in 3Q, 38% in 9M) due to lower foreign exchange variations and reduced USD-denominated debt balances.
Outlook, Risks, and Unusual Items
- Terminal 6 Delay Penalty: Commercial operation of Terminal 6 was delayed 53 days due to COVID-19. CAMMESA imposed a USD 4.4 million penalty, which the Company has rejected and is contesting with evidence of extraordinary circumstances.
- Regulatory Changes: Resolution No. 1037/2021 created an export account to finance infrastructure due to high energy demand in Brazil. A transitory recognition for generating agents is expected for transactions between Sept 2021 and Feb 2022, though specific instructions are pending.
- Impairment Charges: A significant non-cash impairment of Ps. 4.26 billion was recorded in 9M2021 related to specific plants, heavily impacting net income.
- Hydro Constraints: Continued drought in the region has negatively impacted hydro generation (Piedra del Águila), reducing water inflow and reservoir levels.
- Guarantee Release: Corporate guarantees for La Castellana II and La Genoveva II projects were released in September 2021 upon project completion.
Investor Verification Checklist
- Penalty Resolution: Verify the status of the USD 4.4 million penalty dispute regarding Terminal 6's delayed commercial operation.
- Impairment Details: Review the specific valuation methodology and future impact of the Ps. 4.26 billion impairment charge on Brigadier Lopez and Lujan de Cuyo plants.
- Regulatory Compensation: Monitor the publication of future regulatory instructions regarding the transitory recognition for generating agents under Resolution 1037/2021.
- Hydro Recovery: Assess the timeline for hydro generation recovery given the ongoing drought conditions in the Limay and Collón Curá rivers.
- Debt Maturity: Analyze the breakdown of the Ps. 29.7 billion consolidated net debt, specifically the current vs. non-current portions, to evaluate liquidity risks.