EDENOR 2Q22 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 summarizes results for the second quarter and first six months ended June 30, 2022. All financial figures are presented in Argentine Pesos (ARS) on a constant purchasing power basis, except where noted as historical values.
Key Financial Metrics
| Metric (Million ARS) | 2Q 2022 | 2Q 2021 | 6M 2022 | 6M 2021 |
|---|---|---|---|---|
| Revenue from Sales | 36,729 | 39,155 | 72,426 | 77,443 |
| Gross Margin | 9,626 | 13,821 | 24,212 | 28,894 |
| Net Operating Income | (8,872) | (1,078) | (10,681) | (2,702) |
| EBITDA | (5,503) | 2,239 | (3,968) | 3,945 |
| Net Income (Loss) | (6,549) | (17,920) | (9,859) | (19,113) |
| Capital Expenditures | 5,772 | 6,023 | 8,655 | 10,131 |
| Cash & Equivalents (End Period) | 3,847 | 14,056 | 3,847 | 14,056 |
Liquidity and Debt: As of June 30, 2022, dollar-denominated financial debt totaled $78 million. Net cash position was negative $154 million. The company reported a significant overdue principal balance of ARS 38,937 million plus interest/penalties of ARS 40,372 million owed to the Wholesale Electricity Market (CAMMESA).
Material Changes vs. Prior Period
- Revenue Decline: Sales revenue decreased 6% in 2Q22 due to delayed tariff adjustments in an inflationary environment, partially offset by an 8.3% increase in energy sales volume (5,919 GWh).
- Margin Compression: Gross margin fell 30% in 2Q22. Energy purchases increased 7% in real terms, while operating expenses rose 13% due to higher energy prices and regulatory penalties.
- Loss Reduction: Despite negative EBITDA, the net loss improved significantly, decreasing 63% in 2Q22 compared to 2Q21. This was driven by a positive result from exposure to changes in purchasing power (RECPAM) of ARS 16,984 million.
- Financial Costs: Net financial expenses increased 83% in 2Q22, primarily due to interest accrued on deferred payments to CAMMESA.
Outlook, Risks, and Management Commentary
Regulatory Framework: Effective June 1, 2022, tariffs were adjusted with an average increase of 14% for residential and 15% for general categories. A new subsidy segmentation regime was implemented, where Level 1 (higher income) users will gradually pay full costs by year-end, while Levels 2 and 3 face no new increases in 2022.
Operational Risks: The company faces significant liquidity pressure due to the accumulation of debt with CAMMESA. While Decree 88/2022 extended the "Special Regime for the Regularization of Obligations" until December 31, 2022, the company currently does not meet the financial covenants required to incur new indebtedness, though this does not trigger a payment default event.
Service Quality: Despite financial headwinds, service quality improved. SAIDI (outage duration) and SAIFI (outage frequency) improved by 16% and 8% respectively over the last 12 months. Energy losses decreased to 17.6% in 2Q22 from 18.3% in 2Q21.
Capital Projects: Planned 2022 projects include the renewal of the Malaver transformer and the new Oro Verde substation, with operations expected between October and December 2022.
Investor Verification Checklist
- CAMMESA Debt Resolution: Verify the status of the ARS 79.3 billion (principal + interest) overdue balance and the effectiveness of the government's regularization regime.
- Tariff Implementation: Monitor the actual collection rates following the June 2022 tariff adjustments and the rollout of the subsidy segmentation.
- Covenant Compliance: Review the specific terms of the Class 9 and Class 1 Senior Notes regarding the "Permitted Indebtedness" exceptions given current ratio failures.
- Inflation Impact: Assess the sustainability of the RECPAM (purchasing power exposure) gains which currently offset operating losses.
- Energy Loss Reduction: Validate the continued efficacy of fraud detection and metering programs in maintaining the downward trend in energy losses.