EDENOR Form 6-K Summary: Nine Months Ended September 30, 2017
Business Context and Reporting Period
Company: Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR)
Reporting Period: Nine months ended September 30, 2017 (Interim)
Business: Distribution and sale of electricity in the Greater Buenos Aires area under a regulated concession.
Regulatory Environment: The company operates under a new Tariff Structure Review (RTI) effective February 1, 2017, which aims to restore economic viability. However, significant regulatory uncertainties remain regarding the settlement of historical balances with the Federal Government and CAMMESA.
Key Financial Metrics (Nine Months Ended Sept 30, 2017)
| Metric | Amount (ARS '000s) | YoY Change |
|---|---|---|
| Revenue | 17,576,384 | +92.8% |
| Operating Profit | 1,848,331 | Turnaround from Loss |
| Net Profit | 659,950 | Turnaround from Loss |
| EPS (Basic & Diluted) | 0.73 ARS | vs. (2.05) ARS |
| Operating Cash Flow | 2,079,399 | +10.8% |
| Total Assets | 22,106,519 | +16.8% |
| Total Liabilities | 21,059,286 | +13.3% |
| Shareholders' Equity | 1,047,233 | +189.4% |
| Cash & Equivalents | 67,771 | -73.8% |
Note: All figures are in thousands of Argentine Pesos (ARS). The prior year period (Sept 30, 2016) reported a net loss of 1,842,232 ARS '000s.
Material Changes vs. Prior Period
- Profitability Turnaround: The company shifted from a net loss of 1.84 billion ARS in the prior year to a net profit of 660 million ARS. This is primarily driven by the implementation of the RTI tariff adjustments and a reduction in regulatory penalties recognized in the prior period.
- Revenue Growth: Revenue nearly doubled (92.8% increase) due to tariff adjustments and volume changes.
- Equity Recovery: Shareholders' equity increased significantly from 361.8 million ARS to 1.05 billion ARS, largely due to the current period profit offsetting accumulated losses. The company is no longer subject to mandatory share capital reduction under local law.
- Working Capital Deficit: Despite profitability, the company maintains a working capital deficit of approximately 4.1 billion ARS, heavily influenced by a 4.4 billion ARS obligation to CAMMESA (principal and accrued interest).
- Cash Position: Cash and cash equivalents declined by 73.8% to 67.8 million ARS, driven by significant investing outflows (2.14 billion ARS) for property, plant, and equipment.
Outlook, Risks, and Management Commentary
- Regulatory Uncertainty: Management notes that while the RTI has restored the economic equation, the definitive treatment of outstanding balances with the Federal Government and CAMMESA remains pending resolution by the Ministry of Energy and Mining (MINEM).
- Tariff Deferrals: Approximately 4.2 billion ARS of deferred income from the RTI has not yet been recognized. Additionally, a scheduled tariff increase for November 2017 was postponed by the regulator until December 1, 2017.
- Legal Contingencies: The company waived rights to invoke claims related to the 2001 economic emergency as a condition for the RTI. An arbitration proceeding by the parent company (EASA) was discontinued.
- Corporate Restructuring: The parent company (EASA) merger with IEASA into CTLL was denied by the regulator (ENRE) in August 2017; the company has appealed this decision. A broader merger within the Pampa Energía group is also underway.
- Financing: In October 2017 (post-period), the company secured a USD 50 million loan from ICBC Dubai to finance investments and working capital.
Investor Verification Checklist
- Currency Risk: Verify the impact of Argentine Peso devaluation on the company's USD-denominated debt (approx. 174.6 million USD non-current borrowings) and future cash flows.
- Regulatory Settlement: Monitor the resolution of the 4.4 billion ARS CAMMESA balance and the 4.2 billion ARS deferred income recognition.
- Liquidity Constraints: Assess the sustainability of operations given the negative working capital and the recent decline in cash reserves despite positive operating cash flow.
- Dividend Policy: Confirm if the company meets the "Investment Grade" rating and debt-to-equity covenants required to distribute dividends, as negative covenants in the Corporate Notes program currently restrict payments.
- Merger Status: Track the outcome of the appeal regarding the EASA/IEASA merger denial and the progress of the broader Pampa Energía group reorganization.