Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (EDN) Q2 2025 Earnings Call Transcript

Empresa Distribuidora y Comercializadora Norte SA

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Overview

The earnings call summary shows strong financial metrics with a significant EBITDA increase and revenue growth, which is positive. However, there are concerns about regulatory uncertainties, high energy losses, and economic conditions in Argentina, which are negative. The absence of Q&A insights and no mention of shareholder returns further neutralizes the sentiment. The company's financial improvements are offset by potential risks, leading to a neutral prediction for stock price movement.

Key Financial Performance

Accumulated EBITDA (First 6 months of 2025) ARS 289 billion, reflecting a sharp improvement in operating results due to tariff increases (319% adjustment in February 2024, 4% average monthly adjustments since August 2024, and a 5-year tariff review implemented in May 2025). Excluding a gain of ARS 168 billion from CAMMESA agreement, the accumulated EBITDA is ARS 121 billion.

EBITDA (Q2 2025) ARS 222 billion, up from ARS 108 billion in Q2 2024. The increase is attributed to higher revenues from tariff reviews and adjustments, partially offset by higher energy costs due to reduced subsidies.

Revenues (Q2 2025) ARS 622,989 million, a 2% increase in real terms from ARS 608,876 million in Q2 2024. This rise is mainly due to tariff normalization.

Energy Sales Volume (Q2 2025) 5,668 gigawatts, a 1.85% year-over-year increase, driven by lower temperatures and higher residential demand.

Net Financial Expenses (Q2 2025) ARS 110 billion, 40% lower than Q2 2024, primarily due to reduced interest on CAMMESA debt and penalties.

Net Profit (Q2 2025) ARS 93 billion, up from ARS 68 billion in Q2 2024. The increase is due to lower accounting gains from inflation, higher income tax charges, and the positive effect of the CAMMESA agreement.

CapEx (First 6 months of 2025) ARS 163 billion, in line with the ARS 225 million CapEx plan, reflecting a commitment to improving service quality and operational efficiency.

Energy Losses (Last 12 months as of Q2 2025) 15.55%, slightly up from 15.18% in 2024. Efforts to reduce losses include market discipline measures and AI-powered inspection tools.

Service Quality Indicators (Q2 2025) SAIDI at 7.8 hours and SAIFI at 3.1 average outages per client, showing a 72% and 66% improvement, respectively, compared to 2017 levels.

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Operating Highlights

Smart Network Transformation: Edenor is advancing its network transformation by increasing remote control points, tele-supervision points, and smart meters. This allows for quicker problem resolution, often within minutes, without requiring physical team deployment.

Energy Transition Strategy: The company has made its first minority investment in lithium and copper projects in Northern Argentina, focusing on pre-exploration stages.

Customer Base Expansion: Edenor's customer base grew by 2% year-over-year, reaching 3.36 million customers, driven by residential and medium-sized commercial clients.

Energy Sales Growth: Energy sales volume increased by 1.85% year-over-year in Q2 2025, reaching 5,668 gigawatts, supported by lower temperatures and higher residential demand.

EBITDA Growth: EBITDA for Q2 2025 rose to ARS 222 billion, a significant increase from ARS 108 billion in Q2 2024, driven by tariff adjustments and operational improvements.

Debt Regularization with CAMMESA: Edenor signed agreements to regularize past energy purchase debts with CAMMESA, resulting in a gain of ARS 168 billion in Q2 2025.

Service Quality Improvements: Investments have led to a 72% reduction in outage duration and a 66% reduction in outage frequency since 2017, with SAIDI and SAIFI indicators showing strong performance.

5-Year Tariff Review: The review granted a 14.35% tariff increase over inflation, applied gradually to mitigate broader economic impacts, improving long-term financial visibility.

Credit Rating Upgrades: Standard & Poor's and Moody's upgraded Edenor's credit ratings, reflecting improved financial stability and regulatory changes.

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Risk or Challenges

Regulatory Framework: The gradual implementation of tariff increases to limit inflation effects could delay revenue realization and impact cash flow. Additionally, pending regulatory claims for past tariff adjustments represent a significant financial uncertainty, approximately 3-4 times the debt owed to CAMMESA.

CAMMESA Debt: While agreements have been made to regularize debt, the long-term financial burden of 72-75 installment plans with interest rates tied to CAMMESA's rates could strain financial resources. The reliance on these agreements for financial stability poses a risk if economic conditions worsen.

Energy Losses: Energy losses remain high at 15.55%, with only minor improvements from 2024 levels. This represents inefficiencies and potential revenue loss, despite ongoing efforts to address the issue.

Economic Conditions in Argentina: The company's operations are heavily influenced by Argentina's broader economic conditions, including inflation and currency devaluation, which could impact costs, revenues, and financial stability.

Debt and Financial Obligations: The issuance of $95 million in new notes and the ongoing financial obligations, including CAMMESA debt, could increase financial risk, especially if revenue growth does not meet expectations.

Energy Subsidy Reductions: The reduction in energy subsidies has increased energy purchase costs, which could pressure margins if not offset by tariff adjustments or efficiency gains.

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Guidance & Outlook

Tariff Adjustments: The company has implemented a 5-year tariff review, granting a 14.35% increase over inflation. This is being applied gradually to limit inflation effects, with adjustments of 0.42% over inflation from June 2025 to November 2027, plus monthly inflation adjustments based on a formula of 33% consumer price index and 67% wholesale price index.

Debt Regularization: The company has signed a plan to regularize debt energy purchases over 72 installments with a 12-month grace period and an interest rate of 50% of CAMMESA's rates. A prior plan was converted into pesos with similar terms. These agreements are expected to improve financial stability.

Revenue Growth: Revenues are expected to continue benefiting from tariff normalization and monthly adjustments, with a focus on improving cash flows and earnings.

Capital Expenditures: The company plans to invest ARS 225 billion in 2025, focusing on service quality improvements, network expansion, and smart grid technologies.

Energy Transition Strategy: Edenor has made its first minority investment in lithium and copper projects in Northern Argentina, aligning with its energy transition strategy and corporate business expansion.

Debt Issuance: The company successfully issued $95 million in new notes, improving its financial position and risk profile. This includes $80 million in Class 8 notes and ARS 20 billion in Class 9 notes, with favorable interest rates and maturity terms.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Review of Unclear Management Responses

A:No questions were asked or answered during the conference call.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

EDN Transcript

Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (EDN) Q3 2025 Earnings Call Transcript

Unknown11-7

Despite a strong EBITDA growth and improved tariff adjustments, there are concerns about economic instability, currency risks, and unclear management responses to debt-related queries. The Q&A section revealed management's hesitance to provide clarity on regulatory matters, which may lead to investor caution. Additionally, the slight revenue growth and energy sales volume decline could temper optimism. Thus, the overall sentiment remains neutral.

Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (EDN) Q2 2025 Earnings Call Transcript

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Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (EDN) Q1 2025 Earnings Call Transcript

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Despite strong financial performance with significant EBITDA and revenue growth, the lack of clarity in management's responses during the Q&A, particularly regarding future EBITDA, free cash flow, and dividend policy, creates uncertainty. The absence of a shareholder return plan and potential financial strain from debt further contribute to a neutral outlook. However, the tariff adjustments and improved credit ratings are positive factors, balancing the overall sentiment. The market reaction is likely to remain within a neutral range, as investors await more definitive guidance and strategic clarity.

Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (EDN) Q4 2024 Earnings Call Transcript

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Edenor shows strong financial performance with a 97% revenue increase and improved EBITDA, driven by tariff adjustments. The positive outlook is supported by a stable credit rating and strategic investments in energy transition. However, regulatory risks and economic conditions in Argentina pose challenges. Lack of shareholder return plans and unclear CapEx allocation limit upside potential. Overall, the positive financial metrics and strategic initiatives are likely to result in a stock price increase of 2% to 8% over the next two weeks.

EDN Report

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