EDENOR Form 6-K Summary: Fiscal Year 2017
Business Context and Reporting Period
This Form 6-K, filed on March 16, 2018, contains the Annual Report and Financial Statements for Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR) for the fiscal year ended December 31, 2017. EDENOR is an Argentine electricity distribution company serving the Buenos Aires Metropolitan Area. The reporting period marks the first full year of operation under the new Tariff Structure Review (RTI), which began on February 1, 2017, ending a 15-year period of regulatory irregularity.
Key Financial Metrics
| Metric | 2017 (ARS) | 2016 (ARS) | Change |
|---|---|---|---|
| Revenue | 24.3 billion | 13.0 billion | +86% |
| Operating Result | 2.5 billion (Profit) | (0.656) billion (Loss) | Turnaround |
| Net Result | 0.682 billion (Profit) | (1.189) billion (Loss) | Turnaround |
| Operating Cash Flow | 3.28 billion | 2.93 billion | +12% |
| Investments | 4.1 billion | 2.7 billion (approx.) | +53% vs 2016 |
| Total Assets | 25.3 billion | 18.9 billion | +34% |
| Total Liabilities | 24.2 billion | 18.6 billion | +31% |
| Equity | 1.06 billion | 0.36 billion | +193% |
| Net Financial Expense | 1.4 billion | 1.3 billion | +7% |
Note: All figures are in Argentine Pesos (ARS). The filing does not provide specific margin percentages or debt-to-equity ratios.
Material Changes vs. Prior Period
- Profitability Turnaround: The company moved from a net loss of ARS 1.2 billion in 2016 to a net profit of ARS 682 million in 2017, driven by the implementation of the RTI tariff adjustments.
- Revenue Growth: Revenue increased 86% to ARS 24.3 billion, reflecting rate hikes and the gradual application of the Company's Own Distribution Cost (CPD).
- Energy Costs: Energy purchases increased 112% to ARS 12.8 billion due to higher wholesale prices and volume adjustments.
- Investment Surge: Capital expenditures reached ARS 4.1 billion, a 53% increase over 2016, focusing on network reinforcement and new connections.
- Equity Restoration: Equity grew by 193% to ARS 1.06 billion, though the company continues to carry accumulated losses.
- Consumption Trends: Total energy demand decreased 3.3% to 25,950 GWh, attributed to a mild winter and price elasticity, despite record peak power demands.
Guidance, Outlook, and Risks
Management Commentary and Outlook: Management views 2017 as a historic year establishing regulatory predictability for the next five years. The company expects to continue restoring its economic and financial situation through the gradual application of approved tariffs. Future focus areas include meeting unprecedented investment requirements (projected to continue for at least 5 years), reducing non-technical losses (currently 17.1%), and modernizing customer service through digital channels.
Risks and Contingencies:
- Regulatory Uncertainty: The definitive treatment of credits and debits resulting from the breach of the 2013 Adjustment Agreement remains pending. This includes unresolved balances from the transition period.
- Energy Losses: Non-technical losses (theft and fraud) remain high at 17.1%, exceeding the regulatory limit by approximately 7% and representing nearly ARS 4 billion in uncollected revenue.
- Financial Exposure: Net financial expenses increased due to interest on past-due debts with CAMMESA (wholesale market administrator).
- Macroeconomic Factors: The company operates in an environment of high inflation (24.8% in 2017) and currency volatility, though the RTI includes semi-annual adjustment mechanisms for inflation and wholesale price changes.
Key Facts for Investor Verification
- Tariff Deferral: Approximately ARS 6.3 billion of approved revenue was deferred and will be billed in 48 monthly installments starting February 1, 2018. Investors should monitor the collection of these deferred amounts.
- Merger Status: The parent company (EASA) is in the process of merging with CTLL, which is merging into Pampa Energía S.A. The filing notes that necessary registrations for the surviving company are pending as of the report date.
- Loss Reduction Plan: Verify the effectiveness of the "MIDE" meter installation program (48,560 installed in 2017) and anti-fraud operations in reducing the 17.1% loss rate.
- Debt Structure: Confirm the terms of the new USD 50 million loan facility obtained from ICBC Bank and the status of outstanding debts with CAMMESA.
- Regulatory Resolution: Monitor the final resolution regarding the damages claim filed in 2013 related to the breach of the Adjustment Agreement.