Business Context and Reporting Period
Company: Central Puerto S.A. (NYSE: CEPU), a leading power generation company in Argentina.
Reporting Period: Third Quarter (3Q) and nine-month period (9M) ended September 30, 2020.
Filing Date: November 11, 2020 (Form 6-K).
Accounting Basis: Financial statements are adjusted for inflation under IAS 29, stated in the measuring unit current at the end of the reporting period. Comparisons are made against the same periods in 2019, restated to current units.
Key Financial Metrics
| Metric (Million Ps.) | 3Q 2020 | 3Q 2019 | 9M 2020 | 9M 2019 |
|---|---|---|---|---|
| Revenues | 9,079 | 10,616 | 25,894 | 30,054 |
| Gross Profit | 5,462 | 6,251 | 14,871 | 14,468 |
| Operating Income | 6,484 | 18,354 | 20,519 | 31,134 |
| Adjusted EBITDA | 7,682 | 19,314 | 24,347 | 33,429 |
| Net Income | 2,287 | 4,817 | 5,729 | 8,965 |
| EPS (Ps.) | 1.51 | 3.78 | 3.78 | 6.37 |
| Cash & Equivalents (End of Period) | 349 | N/A | 349 | N/A |
| Consolidated Net Debt | (36,160) | N/A | (36,160) | N/A |
Note: All figures are in Argentine Pesos (Ps.) adjusted for inflation. Net Debt is presented as a negative value indicating debt exceeds cash.
Material Changes vs. Prior Period
- Revenue Decline: Revenues decreased 14% in both 3Q and 9M 2020 compared to 2019. This was primarily driven by the abrogation of Resolution 70/2018 in December 2019, which eliminated fuel remuneration for units under the "Energía Base" framework. Without this fuel component, core revenues actually increased.
- Profitability: Adjusted EBITDA fell 60% in 3Q and 27% in 9M. The decline is largely attributed to lower foreign exchange gains on trade receivables (due to reduced peso depreciation in 2020 vs. 2019) and the absence of a one-time gain in 3Q 2019 related to CAMMESA receivable cancellations.
- Operating Metrics:
- Generation: Total energy generation decreased 1% in 3Q and 2% in 9M. Hydro generation dropped significantly (21% in 3Q) due to low water availability at Piedra del Águila.
- Renewables: Wind generation surged 79% in 3Q and 90% in 9M due to new operational capacity (La Castellana II, La Genoveva II, Manque, Los Olivos).
- Thermal Availability: Dropped to 89% in 3Q (vs. 94% in 3Q 2019) due to a transformer failure at the Luján de Cuyo unit (LDCUCC25), though this remained above the market average of 84%.
- Cost Structure: Cost of sales decreased 17% in 3Q and 29% in 9M, primarily due to the cessation of self-procured fuel purchases following the regulatory change.
Outlook, Risks, and Management Commentary
- Expansion Progress:
- La Genoveva I: Partially commissioned in September/October 2020; expected full completion (88.2 MW) in November 2020.
- Terminal 6-San Lorenzo: Construction ongoing. Gas turbine commissioning projected for November 2020 (open cycle) and January 2021 (dual fuel). Full project completion expected H1 2021.
- Financing: Issued US$ 50 million in Green Bonds in August 2020 to refinance bridge loans for wind farm construction.
- FX Controls (Risk): New Central Bank of Argentina (BCRA) regulations restrict access to foreign exchange for debt repayment. Companies can access 40% of installments via the official market; the remaining 60% requires a refinancing plan with lenders. This affects US$ 36 million installments due in December 2020 and March 2021 for the Brigadier López acquisition loan. Negotiations with lenders are ongoing.
- Regulatory Environment: Continued impact of Resolution 31/2020 on spot market prices and the suspension of monthly price adjustments (Annex VI) in April 2020.
Investor Verification Checklist
- FX Liquidity: Verify the status of negotiations with lenders regarding the BCRA's 60% refinancing requirement for the Brigadier López loan installments due in late 2020/early 2021.
- Regulatory Revenue: Confirm the long-term impact of the abrogation of Resolution 70/2018 on fuel remuneration and the stability of Resolution 31/2020 pricing mechanisms.
- Asset Availability: Monitor the operational status of the Luján de Cuyo combined cycle unit (LDCUCC25) and the commissioning timeline for the Terminal 6 project.
- Hydrology: Assess water flow forecasts for the Limay and Collón Curá rivers, which directly impact the Piedra del Águila hydro plant output.
- Inflation Adjustments: Ensure comparisons with historical data account for the IAS 29 inflation adjustments applied to the 2019 comparative figures.