EDENOR 3Q22 Financial Summary
Business Context and Reporting Period
Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR) is Argentina's largest electricity distributor by customer count and energy sales, serving the northwestern zone of Greater Buenos Aires and the northern part of the City of Buenos Aires. This Form 6-K reports results for the third quarter and nine months ended September 30, 2022. All financial figures are presented in Argentine Pesos (ARS) on a constant purchasing power basis, in accordance with IFRS, except for the Income Statement which is also presented at historical values.
Key Financial Metrics
| Metric (Million ARS, Constant Purchasing Power) | 3Q 2022 | 3Q 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Revenue from Sales | 47,454 | 53,430 | 135,797 | 147,892 |
| Adjusted EBITDA | (2,703) | 5,667 | (6,789) | 11,214 |
| Net Income (Loss) | (6,082) | (1,105) | (18,107) | (24,418) |
| Capital Expenditures | 7,102 | 6,866 | 16,802 | 18,935 |
| Cash and Cash Equivalents (End of Period) | 3,847 | 14,056 | 3,847 | 14,056 |
Debt and Liquidity: As of September 30, 2022, outstanding dollar-denominated financial debt was USD 78 million. Net cash position (cash less financial debt) was negative USD 197 million. Trade receivables collection rate was 97%, with a defaulting balance of ARS 9,479 million.
Material Changes vs. Prior Period
- Revenue Decline: 3Q22 revenue fell 11% year-over-year to ARS 47,454 million, driven by tariff delays in an inflationary environment, despite a 3.2% increase in energy sales volume (5,979 GWh).
- EBITDA Deterioration: Adjusted EBITDA swung from a profit of ARS 5,667 million in 3Q21 to a loss of ARS 2,703 million in 3Q22 (-148%). This was caused by reduced gross margins (down 34%) and increased operating costs.
- Net Loss Expansion: Net loss for 3Q22 widened to ARS 6,082 million from ARS 1,105 million in 3Q21. However, the accumulated 9-month net loss decreased by 26% compared to the prior year.
- Financial Costs: Net financial expenses increased 130% in 3Q22 to ARS 20,615 million, primarily due to interest accrued on deferred payments to the Wholesale Electricity Market (CAMMESA).
- Energy Losses: Energy losses decreased by 17.7% in 3Q22 compared to 18.8% in 3Q21, aided by market discipline actions and fraud detection.
Outlook, Risks, and Management Commentary
- Regulatory Environment: The Secretary of Energy reduced subsidies for Public Health, Education, Non-Residential, and Level 1 Residential users by 20% effective September 1, 2022. However, the Value Added Distribution (VAD) increase remains pending.
- Debt Restructuring: On October 25, 2022, EDENOR completed a voluntary exchange of Class 9 Senior Notes (USD 98.05 million). New Senior Notes were issued: Class 1 (USD 55.2 million, maturing May 2025) and Class 2 (USD 30 million, maturing November 2024).
- Covenant Status: As of September 30, 2022, the company's Indebtedness and Financial Expenses Coverage ratios did not meet established parameters. However, this does not trigger a Payment Default Event, and the company retains the ability to incur permitted indebtedness.
- Operational Quality: Service quality improved with SAIDI (outage duration) at 9.0 hours and SAIFI (outage frequency) at 3.7 outages per client, representing 19% and 13% improvements respectively over the prior year.
- Risks: Key risks include continued tariff delays relative to inflation, high exposure to changes in purchasing power (RECPAM), and the accumulation of overdue obligations to CAMMESA (ARS 50,946 million principal plus interest/penalties).
Investor Verification Checklist
- Verify the status of the pending VAD (Value Added Distribution) tariff increase and its potential impact on future gross margins.
- Confirm the terms and maturity schedule of the newly issued Senior Notes (Class 1 and Class 2) following the October 2022 exchange.
- Monitor the evolution of the overdue balance with CAMMESA and the effectiveness of the "Special Regime for the Regularization of Obligations."
- Assess the sustainability of the 17.7% reduction in energy losses and the associated revenue recovery.
- Review the company's ability to maintain service quality (SAIDI/SAIFI) while capital expenditures decreased 11% in real terms.