EDENOR — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2018; filed April 30, 2019. This is an annual report, not a standalone fourth-quarter filing, and the supplied text does not provide discrete Q4 financial results. Edenor distributes electricity under an exclusive concession in northern Buenos Aires and served approximately 3.04 million customers. Financial statements are audited and prepared under IFRS. Because Argentina was deemed hyperinflationary from July 1, 2018, statements and comparatives are restated in pesos at December 31, 2018 purchasing power unless otherwise noted.
Key financial metrics
Amounts below are in Ps. millions, restated to the measuring unit current at December 31, 2018, unless specified.
| Metric | 2018 | 2017 | Change / context |
|---|---|---|---|
| Revenue | 55,954 | 39,603 | +41%; tariff and energy-cost increases, partly offset by lower sales volume |
| Electricity purchases | (31,876) | (20,820) | +53% in expense |
| Gross profit | 13,165 | 9,536 | +38%; gross margin approximately 23.5% vs. 24.1% |
| Operating profit | 3,941 | 2,371 | +66%; operating margin approximately 7.0% vs. 6.0% |
| Net financial expense | (6,270) | (2,285) | Higher interest and foreign-exchange losses |
| Gain on net monetary position | 8,504 | 5,505 | Material inflation-accounting gain |
| Net profit | 4,297 | 5,081 | Down 15%; net margin approximately 7.7% vs. 12.8% |
| Operating cash flow | 9,621 | 7,266 | +32% |
| Cash and cash equivalents at year-end | 27.6 | 122.3 | Substantial decline |
| Total borrowings | 8,270 | 6,294 | Includes approximately US$161.65 million of 2022 notes and ICBC borrowing |
At year-end, current assets were Ps.13,708 million and current liabilities Ps.20,979 million, a working-capital deficit of approximately Ps.7,271 million. Management identifies Ps.11.9 billion owed to CAMMESA, including accrued interest, as a key liquidity issue; this commercial debt is distinct from financial borrowings. Accrued ENRE fines and penalties were approximately Ps.6.9 billion. Capital expenditures were reported at Ps.8.55 billion in nominal pesos; cash payments for property, plant and equipment were Ps.8.27 billion in the restated cash-flow statement.
Material changes versus the prior comparable period
- Revenue grew sharply following tariff revisions and higher recognized distribution costs, but energy sales fell approximately 1.9%, from 21,584 GWh to 21,172 GWh. Customer count increased to 3.04 million from 2.95 million.
- Electricity purchase costs rose faster than revenue. Energy losses increased to 18.2% from 17.1%, including non-technical losses of 9.8% versus 8.3%.
- Operating profit improved, but net profit declined as net financial expense rose substantially. The Ps.8.5 billion inflation-accounting gain materially supported reported earnings; it is not operating cash generation.
- Operating cash flow increased, but cash fell to Ps.27.6 million after investment outflows and financing uses. The company repurchased US$10.2 million nominal amount of 2022 notes and spent Ps.1.07 billion on treasury shares.
- Service indicators improved: average interruption frequency fell to 6.94 from 9.02 and average interruption duration to 22.65 hours from 27.55.
Outlook, management commentary and risks
- Management said the 2017 tariff review and subsequent rate schedules should help restore the company’s financial position and fund operations, investment and interest payments. It also emphasized that pending government obligations and rising costs continued to strain liquidity. No quantified company earnings or cash-flow guidance is provided.
- Tariff adjustments were politically contentious. In 2018, portions of approved distribution-cost updates were deferred; management cited more than Ps.900 million of unrecognized social-tariff discounts, approximately Ps.1 billion of deferred adjustments and more than Ps.1 billion in unpaid consumption in low-income areas and shantytowns. The treatment and recovery of several items remained under negotiation.
- Subsequent to year-end, a February 2019 agreement provided for transfer of distribution oversight from the federal government to the Province and City of Buenos Aires. Key terms—including regulatory continuity and settlement of historical claims and obligations—remained unresolved in the filing. The company was not a party to the transfer agreement.
- Argentina’s CPI inflation was 47.6% in 2018, and the peso depreciated approximately 102% against the U.S. dollar. The company collects mainly in pesos, has dollar-denominated debt and reported no current currency hedge. A hypothetical 10% peso depreciation was estimated to reduce results by approximately Ps.472 million.
- CAMMESA debt repayment terms, loans and other obligations under prior support arrangements, and the treatment of ENRE penalties or customer discounts remained pending. Management warned that tariff delays or a demand for immediate CAMMESA repayment could create material liquidity pressure.
- The real-estate purchase and construction agreement was terminated after the seller failed to deliver. Edenor claimed approximately Ps.3 billion in damages and pursued a surety bond; the seller entered reorganization and the insurer faced restrictions on asset dispositions. Edenor recorded an allowance and reported net non-current receivables of Ps.765.6 million.
- Other material risks include regulatory changes and fines, concession or pledged-share enforcement, service interruptions, energy theft and collections, inflation and exchange rates, political and economic conditions, litigation, and cyber or infrastructure disruptions. Edenor reported no dividends paid since 2001.
Most important facts for investors to verify
- Reconcile the Ps.11.9 billion CAMMESA commercial balance, its maturity and any proposed repayment or settlement terms with the reported Ps.8.27 billion of financial borrowings.
- Confirm the collection, timing and regulatory treatment of deferred tariff adjustments, social-tariff costs, shantytown consumption and outstanding Adjustment Agreement obligations.
- Assess cash conversion and liquidity after investment spending; distinguish the inflation-accounting gain from cash earnings and consider the very low year-end cash balance.
- Track the transfer of regulatory jurisdiction and whether the concession, tariff mechanism and historical claims remain protected or are renegotiated.
- Monitor energy losses, receivable impairment and ENRE penalties, including the status of accrued penalties and the risk of additional customer credits or fines.
- Verify the recoverability of the real-estate claim and surety bond, and the status of associated arbitration, insolvency and insurance proceedings.
Audit note: The auditor gave an unqualified opinion on the IFRS financial statements and concluded that internal control over financial reporting was effective as of December 31, 2018.