Central Puerto S.A. 2Q2021 Financial Summary
Business Context and Reporting Period
Central Puerto S.A. (NYSE: CEPU), a major private power generator in Argentina, reported consolidated results for the second quarter and first half of 2021 ended June 30, 2021. 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 Ps.) | 2Q2021 | 1H2021 | 2Q2020 | 1H2020 |
|---|---|---|---|---|
| Revenues | 12,254 | 23,532 | 10,790 | 23,460 |
| Gross Profit | 5,533 | 11,050 | 5,720 | 13,138 |
| Operating Income | 2,360 | 10,976 | 9,574 | 19,581 |
| Adjusted EBITDA | 4,655 | 15,394 | 11,406 | 23,252 |
| Net Income (Loss) | (4,413) | (3,703) | 3,288 | 4,802 |
| EPS (Ps.) | (2.95) | (2.48) | 2.19 | 3.17 |
| Cash & Equivalents (End of Period) | 290 | 290 | 3,203 | 3,203 |
| Consolidated Net Debt | (40,394) | (40,394) | N/A | N/A |
Operating Highlights: Energy generation increased 40% in 2Q2021 to 3,740 GWh compared to 2Q2020, driven by higher hydro dispatch, thermal unit recovery, and new wind capacity. Thermal availability reached 90%.
Material Changes vs. Prior Period
- Net Loss vs. Profit: The company reported a net loss of Ps. 4.4 billion in 2Q2021, a reversal from a Ps. 3.3 billion profit in 2Q2020. This was primarily driven by a Ps. 3.9 billion impairment charge on property, plant, and equipment (Brigadier López and Luján de Cuyo plants) and higher income tax expenses due to new legislation.
- Adjusted EBITDA Decline: Adjusted EBITDA fell 59% year-over-year in 2Q2021 to Ps. 4.7 billion. Excluding FX differences and impairment, Adjusted EBITDA was relatively stable at Ps. 6.9 billion (down 5% vs. prior year).
- Revenue Growth: Revenues rose 14% in 2Q2021, fueled by a 39% increase in Spot Sales/Energia Base and a 30% increase in Steam Sales, partially offset by a 5% decrease in contract sales.
- Cost Increases: Cost of sales increased 33% year-over-year, driven by higher production costs, maintenance expenses, and depreciation.
Guidance, Outlook, and Risks
- Regulatory Changes: Resolution No. 440/2021 updated spot market remuneration values by 29% retroactively to February 2021. However, this triggered the aforementioned asset impairment charges.
- Taxation: Law No. 27,630 introduced a progressive corporate income tax scale (25%, 30%, 35%) effective for fiscal years beginning January 1, 2021, significantly increasing tax expenses.
- Debt Restructuring: The company amended its syndicate loan (Citibank, JP Morgan, Morgan Stanley) on June 15, 2021. This rescheduled 60% of installments maturing in 2021, extending the final term to January 2024. Dividend restrictions remain in place for 2021, with a maximum of USD 25 million allowed in 2022 and USD 20 million in 2023.
- Liquidity: Cash and cash equivalents decreased to Ps. 290 million as of June 30, 2021. Net cash provided by operating activities was Ps. 6.6 billion in 1H2021, while financing activities used Ps. 6.0 billion primarily for loan repayments.
- Risks: Significant exposure to Argentine peso depreciation, regulatory tariff adjustments, and FX restrictions (Communication "A" 7230) impacting debt servicing.
Investor Verification Checklist
- Impairment Validity: Verify the recoverable value calculations for the Brigadier López and Luján de Cuyo plants that led to the Ps. 3.9 billion charge.
- Debt Service Capacity: Assess the impact of the new amortization schedule and dividend restrictions on future liquidity and shareholder returns.
- Tax Impact: Confirm the long-term effect of the new progressive corporate tax rate on future net margins.
- FX Exposure: Review the sensitivity of financial results to further Argentine peso depreciation, given the significant USD-denominated debt.
- IAS 29 Adjustments: Ensure comparisons with historical data account for the inflation adjustments applied to prior period figures.