Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (EDN) Q2 FY2025 Earnings Call Transcript & Summary

Good morning. My name is Lucila Ramallo, Investor Relations Deputy Manager at Edenor. On behalf of Edenor, we would like to thank everybody for participating in this conference call to discuss the results of the second quarter that ending June 30, 2025. We will also have an important recent development and advances in our efforts to strengthen our position as an energy leader. If you would like to receive our earnings release or presentation, you can download them easily from the Investor Relations section on our well site located at www.edenor.com or contact our Investor Relations teams to request the document. This event is being recorded. After the company's remarks are completed, there will be a question-and-answer session for which you may submit questions through the webcast chat. Before proceeding, let me mention that forward-looking statements are based on the belief and assumptions of Edenor's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to the future events, and therefore, depends on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Edenor and could cause results to differ materially from those expresses in such forward-looking statements. Now let me pass the call to German Ranftl, our CFO, who will guide us through the presentation. Thank you.

Thank you, Lucila. Good morning, and welcome to everyone. Your presence here is very important to us, and we hope to provide you with a good understanding of Edenor performance during the second quarter of 2025. Highlights and relevant events. Before moving to the discussions of details of our financial performance during the second quarter of 2025, I would like to take a few minutes to highlight some very relevant and positive developments as shown in Slide #5. Accumulated EBITDA for the first 6 months rose to ARS 289 billion, which reflected a sharp improvement in operating results due to the tariff increases starting with the 319% adjustment that was received in February 2024, followed by 4% average monthly value-added distribution adjustments since August of last year, plus the 5-year tariff review implemented since May of 2025. Their results also includes a gain of ARS 168 billion due to the positive effect of the regularization of the agreement with CAMMESA for the payment of energy purchases from previous periods. Excluding this gain, the accumulated EBITDA as of June 30, 2025, is ARS 121 billion. During May 2025, all pending balance with CAMMESA for past energy purchases were included in 3 payments plans of 72 or 75 installments depending on the plan. Last week, we successfully issued $95 million in new notes with $80 million in Class 8 notes and ARS 20 billion in Class 9 notes. As far as our credit ratings is concerned, in June, Standard & Poor's raises its global scale rating from CCC+ to B- with a stable outlook. During July 2025, Standard & Poor's upgraded the company's institutional and global negotiations program rating on the national scale from Republic of Argentina BB to Republic of Argentina, double BBB- with a stable outlook. At the same time, Moody's raises its long-term global scale rating from CAA1 to B3 changing its outlook from stable to positive. Regulatory framework. As we already highlighted the tariff increases that were given in February 2024 and the average monthly increases of 4% since August 2024 followed by the implementation of the 5-year tariff review have driven a sharp rise in the operating results. In the second quarter of 2025, EBITDA rising ARS 222 billion from ARS 108 billion in the second quarter of 2024. The 5-year tariff review granted the company an increase of 14.35% over inflation. This is being applied gradually in order to limit the inflation effects on the broader economy in Argentina, which is in line with the government's status policy. 3% went into effect in May 1, 2025, and further adjustments of 0.42% are being implemented over inflation, as I said before, from June 1, 2025 until November 1, 2027, plus a monthly adjustment for inflation with a formula that made up of 33% of consumer price index and 67% wholesale price index. Wholesale price index always follows evaluation. Together, these adjustments totaled 3.24% for June, 0.75% in July and 2.1% in August. CAMMESA Debt. As I mentioned earlier, the tariff increases that we have received since February 2024 have been a key driver of improvement in earnings and cash flows, which will allow us to pay 100% of the current monthly invoices for the energy purchase since April 2024 as well as paying all the financing plans that we have outstanding with CAMMESA. On May 21, we signed a plan to regularize debt energy purchases that have not been included in the existing payment plans over a total of 72 installments with a 12-month of grace period and an interest rate of 50% of the interest rates used by CAMMESA adjusted semiannually. In addition, a prior existing plan, whose installments were adjusted based on the energy price in megawatts was converted into pesos at the energy applicable megawatt price of October 2024, with an interest rate of also 50% of the interest rate used by CAMMESA. With the same condition as a current plan, 75% installments remaining as of May with no grace period. The positive impact of these agreements resulted in a gain included in the second quarter of 2025, resulting of ARS 168, 220 million. The regulatory claim for past tariff adjustment differences is still pending and represent approximately 3x to 4x what we owe to CAMMESA. Financial results, revenues. Revenues rose 2% in real terms in the second quarter of 2025 to ARS 622,989 million versus ARS 608,876 million for the same period of last year. This was mainly due to tariff normalization as explained before. Energy sales evolution. As mentioned, the second quarter of 2025 energy sales volume increases 1.85% year-to-year to 5,668 gigawatts, led by the effect of lower temperature and demand from residential customers. Edenor's customers base at the second quarter of 2025 reached 3.36 million people, 2% more versus the second quarter of 2024, this raise was mainly due to an increase in residential and medium-sized commercial clients. The raise was helped by market discipline measures, including the installation of 9,951 energy meters in the second quarter of 2025, which are designated to convert informal unreported connections into fully transparent connections in the electricity distribution system. Distribution margin. For the first 6 months of 2025, our distribution margin rose to ARS 523 billion, mainly due to the increase in the tariff as a result of the tariff normalization process, partially offset by higher energy costs due to the reduction in subsidies and higher sales volume. EBITDA. Looking at the EBITDA for the second quarter of 2025, EBITDA of ARS 222,339 million was recorded and an improvement for the ARS 107,969 million registered in the same period of the previous year. A gain of ARS 168 billion is included due to the positive effect of the reorganization agreements with CAMMESA for the outstanding balance. With this effect, the accumulated EBITDA as of June 30 is ARS 121 billion without the effect of CAMMESA debt. Positive impact was due to higher revenues as a result of the increased year to tariff review included, the 319% in August and all the monthly adjustments that have been given since August 2024 or 4% on average. Increases cost of energy purchase due to the reduction in subsidies, which established limits of 250 kilowatts in customers N3 and 350 kilowatts in customers N2. Net financial expenses. Net financial expenses of ARS 110 billion in the second quarter of 2025 were lower than the same period of the previous year, less 40% versus the second quarter of 2024, primarily due to the reduction impact of interest on debt with CAMMESA and interest and penalties. Net Results, on the net income line, Edenor posted a net profit of ARS 93 billion compared to a profit of ARS 68 billion in the second quarter of 2024. The difference is mainly due to much lower accounting gains related to inflation due to the sharp drop of year-to-year of inflation and the higher income tax charges, offset by the positive effect of the CAMMESA agreement. Not including the CAMMESA agreement resulted benefits from improving operating results and lower financial expenses. CapEx, as of June 30, 2025, we invested ARS 163 billion, in line with our ARS 225 million CapEx plan. Our investment spending reflects our firm commitment to improve service quality, which is reflected in the significant improvement in our main operating indicators. We highlight our expansion of ZAPPALORTO substation the new 132 electroduct ZAPPALORTO-MERLO and the new step-down transformer in PUERTOS DEL LAGO. We continue to work to transform our network into a smart network by insulating increasing numbers of remote control points, tele supervision points as well as smart meters. This allow us to solve problems that raise in the network remotely and quickly, which we do by isolating any part of the system experienced a service problem and restablishing the service to the rest of the customers. We can do this without sending a team physically to the location within a few minutes. More than 44% of the customers are resolved in less than 3 minutes. Let's look at the key operating indicators, energy losses. Our energy losses for the last 12 months were 15.55% as of the second quarter, little changed from 15.18% in 2024. Reducing energy losses is a top priority, and our multidisciplinary teams are working constantly to find innovation ways to combat energy losses. These efforts are completely complemented by our market discipline initiatives that are aimed at curbing inefficiencies and irregularities. Also analytical tools powered by artificial intelligence have improved inspection efficiencies, and our market discipline actions continuing to detect our rectify irregular connections. It is important to remember that the 15.55% total loss a full of 9.58% are losses recognized by the regulator in our tariff. Quality of services. As mentioned earlier, our investment plan is continued to contribute improvements in service quality by reducing the duration and frequency of outages, which have been on the down path since 2017. These levels are and have been comfortable exceeding the levels required by the regulatory entity. For the second quarter, the SAIDI and SAIFI service quality indicators shows continued strong performance at 7.8 hours and 3.1 average outages per client in the quarter, at recorded low levels and down 72% and 66%, respectively, compared to 2017 levels. This recovery in services is mainly due to the strong level of investment that the company has been doing since then. Investment has been focused on implementing improvements in operational process and the adoption of technologies applied to the operations and management of the network. Financial debt. On August 7, we successfully issued $95 million in Class A and 9 notes at attractive rates. Class A notes in dollars amount $80 million received offers of close to $81 million. Interest rate, 8.5% with the Biannual payments, amortization 12 months due to August 2026 Argentine law. Class I -- Class 9 shares in Class 9, sorry, in pesos, amount, ARS 20 billion, approximately $15 million received offers for ARS 25 billion. Interest rate, TAMAR, which is a local interest rate plus 6% with quarterly installments. Amortization bullet also 12 months due in August 7 2026, Argentina Law. Financial debt with the improvement in our risk profile due to important changes on the regulatory front, as we mentioned before, Standard & Poors races its global scale rating from CCC to B- with a stable outlook. Standard & Poor's also upgraded the company's institutional and global registration bond program rating and the national scale from BB to BBB- with a stable outlook. Furthermore, Moody's rises its long-term global scale room rating from CAA1 to B3 changing its outlook from stable to positive. As you can see, the maturity schedule of the debt as of June 2025 in August we canceled notes Class 6 for ARS 18 million, which was made a total of $54 million, sorry, canceled during 2025. Closing remarks. The 5-year tariff review was completed according to schedule and improve the long-term outlook of the company and providing more visibility for ratings with accumulated EBITDA of ARS 289 billion in the first month of 2025. Remember that taking out the CAMMESA effect is ARS 122 billion. The EBITDA of 2025 first 6 months. CAMMESA debt regularization, all outstanding balance are now included in the 3 payments plans to be paid over 72% and -- 72 and 75 installments. The company successfully completed bonds issue of $95 million. As I said, $80 million and ARS 20 billion. As part of our energy transition strategy and the expansion of our corporate business, we recently made our first minority investment in the lithium and copper business in 2 projects in the pre exploration stage in the Northern Argentina, Polymetal, copper and [indiscernible]. With this, I'd like to open the call to questions. To ask a question, please send a written message to ir.edenor through a question and answers menu, identify yourself and stating that you have a question. We thank you again for your support and your engagement as a shareholder and bond holder.

Thank you very much for participating in our quarterly conference call. Please do not hesitate to contact our Investor Relations department for any further inquiries you may have. Good morning to all of you, and have a nice day.