EDN

Business Context and Reporting Period

Empresa Distribuidora y Comercializadora Norte S.A. (Edenor), an Argentine electricity distribution and marketing company, reported financial results for the nine-month period ended September 30, 2024. The filing, a Form 6-K press release dated November 8, 2024, highlights the impact of transitory tariff adjustments and the normalization of electricity tariffs on operational performance.

Key Financial Metrics

Additional Metrics:

• Collection Rate: 94.97% as of September 30, 2024.
• Doubtful Accounts: Ps. 37,229 million.
• Electricity Sales: 17,552 GWh (down 4% year-over-year).
• Customer Base: Increased by 1%.
• Energy Losses: Decreased by 2%.

Note: Prior-year figures have been restated to reflect changes in the purchasing power of the Argentine peso in accordance with IAS 29.

Material Changes Versus Prior Period

• Profitability: Net income increased 44% to Ps. 235,069 million, driven by operating cost efficiency and tariff adjustments. Operating results improved from a loss of Ps. 127,036 million in 2023 to a profit of Ps. 26,850 million in 2024.
• EBITDA Decline: EBITDA decreased 64% to Ps. 138,342 million. This significant drop is attributed to the restatement of prior-year figures for inflation and the specific accounting treatment of tariff adjustments.
• Revenue Growth: Revenues rose 21% due to a partial recomposition of revenues and a 53% increase in the distribution margin following tariff normalizations.
• Investment Increase: Capital investments increased 30% in real terms to Ps. 245,229 million, reflecting a commitment to service quality and expansion.
• Operational Volume: Electricity sales volume decreased 4% due to lower demand, though the customer count grew by 1%.

Outlook, Management Commentary, and Risks

Management Commentary: Management attributes the financial improvement to transitory tariff adjustments implemented between May and July 2024, followed by nominal increases in the Value Added for Distribution (VAD) starting in August. These measures allowed the company to meet energy purchase payments and continue necessary investments.

Outlook: The company is advancing the Tariff Review Process in accordance with the schedule set by the ENRE (National Regulatory Entity for Electricity). Continued investment is planned to maintain service quality, evidenced by improvements in SAIDI and SAIFI indicators and user satisfaction levels.

Risks and Contingencies:

• Tariff Dependency: Financial performance remains heavily dependent on the regulatory tariff review process and the implementation of automatic adjustments.
• Collection Risk: While the collection rate is high (94.97%), there remains a significant balance of doubtful accounts (Ps. 37,229 million).
• Macroeconomic Factors: Results are influenced by inflation adjustments (IAS 29) and the reduction of subsidies to users, which increases energy costs.

Key Facts for Investor Verification

• Verify the methodology used for restating prior-year figures under IAS 29 to understand the true year-over-year EBITDA trend.
• Confirm the timeline and magnitude of future tariff adjustments mandated by the ENRE Tariff Review Process.
• Assess the sustainability of the 94.97% collection rate given the macroeconomic environment in Argentina.
• Review the specific allocation of the 30% increase in real-term investments to ensure alignment with grid reliability goals.
• Monitor the trend in electricity sales volume, which declined 4% despite a growing customer base.