EDENOR 1Q22 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. This Form 6-K reports results for the first quarter ended March 31, 2022. All financial figures are presented in Argentine Pesos (ARS) on a constant purchasing power basis, in accordance with IFRS, unless otherwise noted.
Key Financial Metrics
| Metric (ARS Millions) | 1Q 2022 | 1Q 2021 | Variance |
|---|---|---|---|
| Revenue from Sales | 30,401 | 32,607 | (7%) |
| EBITDA | 1,329 | 1,439 | (8%) |
| Net Income (Loss) | (2,818) | (1,018) | Worsened 177% |
| Capital Expenditures | 2,684 | 3,920 | (32%) |
| Operating Cash Flow | 5,290 | 6,264 | (16%) |
| Cash and Equivalents (End) | 5,456 | 10,699 | (49%) |
Debt and Liquidity: As of March 31, 2022, dollar-denominated financial debt totaled USD 98.1 million. The net cash position (cash less financial debt) was negative USD 100 million. A significant portion of liabilities relates to deferred payments to the Wholesale Electricity Market (CAMMESA), totaling ARS 32,640 million (excluding interest).
Material Changes vs. Prior Period
- Revenue Decline: Sales revenue fell 7% in real terms due to frozen tariffs amidst high inflation, despite a 5% increase in energy sales volume (5,470 GWh vs. 5,212 GWh).
- Widening Losses: Net losses increased by ARS 1,800 million. This was driven by higher financial expenses (up 46% to ARS 9,846 million) due to interest on deferred CAMMESA obligations and a higher result for exposure to changes in purchasing power (RECPAM).
- Cost Management: Energy purchases decreased 9% in real terms. Operating expenses remained relatively flat, decreasing 0.6%, aided by a 62% reduction in the allowance for impairment of trade receivables.
- Investment Reduction: Capital expenditures dropped 32% to ARS 2,684 million, reflecting a strategic reduction in spending.
Outlook, Risks, and Unusual Items
- Debt Restructuring: The company successfully executed an exchange offer for Class 9 Corporate Notes (due Oct 2022). 73.25% of the outstanding notes were exchanged for new Class N1 notes due in 2025, with a 9.75% fixed interest rate. This extends the maturity profile of the debt.
- Regulatory Environment: Public hearings were convened in May 2022 to discuss new seasonal reference prices (PEST) effective June 1, 2022, and the segmentation of energy subsidies. Tariffs remain frozen, creating a mismatch with rising costs.
- Operational Risks: The company faces ongoing challenges with energy theft and fraud, though energy losses decreased to 13.8% (from 16.6% in 1Q21). Service quality indicators (SAIDI/SAIFI) improved by 13% and 11% respectively.
- Forward-Looking Statements: Management notes that future results depend on economic conditions, regulatory decisions regarding tariffs, and the resolution of outstanding obligations with CAMMESA.
Investor Verification Checklist
- Tariff Adjustments: Verify the outcome of the May 2022 public hearings regarding the new seasonal reference prices (PEST) and subsidy segmentation.
- CAMMESA Obligations: Monitor the status of the ARS 32.6 billion debt to the Wholesale Electricity Market and the implementation of the "Special Regime for the Regularization of Obligations."
- Debt Maturity: Confirm the final terms and acceptance rates of the new Class N1 Corporate Notes issued in the exchange offer.
- Inflation Impact: Assess the continued impact of Argentine inflation on the gap between frozen tariffs and rising operational costs.
- Cash Flow Sustainability: Review the trend in operating cash flows given the reduction in capital expenditures and the negative net cash position in USD terms.